Technical Analysis

Downtrend intact in MCX-Lead

Gurumurthy K | Updated on March 28, 2019 Published on March 28, 2019

The Lead futures contract on the Multi Commodity Exchange of India fell sharply in the past week to make an intra-week low of ₹136.15 per kg on Tuesday. But the contract has bounced slightly from this low and is currently trading at ₹138 per kg.

Though the contract can move further higher to test ₹140 and ₹141 levels, the outlook is bearish. The indicators on the charts are also negative. The 21-day moving average has crossed below the 55-day moving average and is on the verge of crossing below the 100-day moving average. This is a negative sign indicating that the upside could be limited. As such, a rally breaking above ₹141 looks unlikely at the moment. A pull-back from the ₹140-141 resistance region can drag the contract lower to ₹136 again. A break below ₹136 can take it lower to ₹133 or even ₹130.

Trading strategy

Traders can go short at ₹140 and ₹141. Stop-loss can be placed at ₹143 for a target of ₹134. Revise the stop-loss lower to ₹137 as soon as the contract moves down to ₹135.

Global trend

The Lead (three-month forward) contract on the London Metal Exchange is on a strong downtrend since the beginning of this month. The contract fell 1.5 per cent in the past week and is currently trading at $2,008 per tonne.

The outlook is negative. A key resistance is at $2,035 which can cap the upside. A fall to $1,950 or even $1,925 looks likely in the coming weeks.

The downside pressure will ease only if the LME-Lead contract breaks above $2,035 decisively. Such a break can take the contract higher to $2,070. A further break above $2,070, though unlikely will pave way for the next targets of $2,100 and $2,130.

Published on March 28, 2019

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