Copper futures on the MCX (Multi Commodity Exchange) ended their losing streak by gaining about 1.8 per cent to close at ₹627 last week. Prior to that, the contract posted a loss for six weeks in a row.
That said, whether there will be a bullish reversal is still far from certain, as the contract lies below some key levels. A decisive breach of ₹700 could turn the outlook positive. Until then, the bias will remain bearish.
In fact, we do not expect the resistance at ₹700 to be breached. The contract, currently trading around ₹638, might rally to ₹670, and possibly to ₹700, but will eventually resume its downward movement. But since there is a chance that the contract will appreciate to ₹700, we suggest waiting for now, and initiating fresh short positions at ₹670 and ₹700.
Strategy: Go short worth half of the intended amount, when the contract moves to ₹670. Add shorts for the remaining amount at ₹700 and then place stop-loss at ₹745. After you short the contract, when it reverses lower and slips below ₹600, tighten the stop-loss to ₹670. Liquidate all the shorts when the contract touches ₹550.
This is a considerable support level and there is a good chance that the contract will rebound from this level.