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The continuous contract of nickel on the Multi Commodity Exchange (MCX), which was on an uptrend since March 2020, lost momentum in October. Although there was no bearish trend reversal, the contract could not rally beyond the resistance band of ₹1,615–1,635.
Nevertheless, as the calendar turned to 2022, the contract started to pick up momentum. The price level of ₹1,550 acted as support where both 21- and 50-day moving averages coincided. The contract began moving up and resulted in the breakout of ₹1,635 last week. Last Friday, it hit a fresh high of ₹1,845. While the price has now moderated to ₹1,716, fresh upward momentum seems to be building up.
The cumulative open interest of all active nickel futures on the MCX has increased to 2,763 contracts from 2,481 by the end of December. This indicated a long build-up. So, the contract is likely to appreciate. Either the contract will rebound from the current levels or might retest the resistance-turned-support of ₹1,635.
Considering the above factors, one can deploy 50 per cent of the intended capital at the current level of about ₹1,716 and accumulate the remaining when the price dips to ₹1,640. Therefore, the average price will be around ₹1,678.
Place initial stop-loss at ₹1,580 and revise it to ₹1,680 when price moves above ₹1,800. When the contract touches ₹1,845, liquidate 50 per cent of the longs and then tighten the stop-loss to ₹1,750. Exit the remaining position at ₹1,900.
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