The lead futures contract on the Multi Commodity Exchange (MCX) is not gaining strength. The 200-day moving average (₹157.5 per kg) resistance continues to cap the upside in the contract over the last couple of weeks. The MCX-Lead futures contract made a high of ₹158 on March 29 and has come-off from there. It is currently trading at ₹155 per kg. The contract has been consolidating in a broad sideways range between ₹152 and ₹158 since the beginning of March. This sideways movement is within the overall downtrend.

Downtrend to resume

Indicators on the chart maintain a bearish bias. The recent consolidation reflects the formation of a wedge pattern. This is a continuation pattern suggesting that the overall downtrend that has been in place since February is likely to resume in the coming days. The level of ₹154 is a key support. A strong break below this support will confirm this pattern. Such a break can drag the contract lower to ₹150 or ₹149 initially. Further break below ₹149 will then increase the likelihood of the contract falling towards ₹147 or even ₹145.

The bearish outlook will get negated if the contract breaks above ₹158 decisively. The downside pressure could ease in such a scenario and the contract can move up to ₹160 or ₹161. If the contract manages to surpass ₹161 decisively, the upmove can then extend to ₹165 and ₹167.

Trading strategy

Traders with a medium-term perspective can go short at current levels and on rallies at ₹157. Stop-loss can be placed at ₹159 for the target of ₹150. Revise the stop-loss lower to ₹153 as soon as the contract moves down to ₹152.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

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