Technical Analysis

Gold might witness price moderation

Akhil Nallamuthu | Updated on April 19, 2020 Published on April 19, 2020

₹45,000 is a key support, below which the selling pressure can intensify

The iCOMDEX composite index of the Multi Commodity Exchange (MCX) lost about 3.2 per cent last week as crude oil, its largest component with 33 per cent weight, weakened.

Gold, the second-largest component with 17 per cent weight, ended the week flat. Going ahead, the index can soften further as the outlook for crude oil and gold is weak.

MCX-Crude (₹2,014)

After gaining for two weeks in succession, the May futures contract of crude oil on the MCX declined throughout the past week and closed with a loss. As a result, the price slipped below the 21-day moving average (DMA). The overall trend is bearish and so the contract might head southwards in the coming days.

The daily relative strength index (RSI) is below the midpoint level of 50. On the other hand, the moving average convergence divergence (MACD) indicator on the daily chart is showing signs of momentum shifting in favour of the bears.

Thus, traders can take a bearish view and short the contract on rallies with a stop-loss at ₹2,325. While ₹1,873 — the previous low — can act as a support, a break below it can intensify the selling pressure. In that case, the contract might fall to ₹1,700.

MCX-Gold (₹45,735)

Extending the uptrend, the June futures contract of gold on the MCX opened with a gap-up and went on to register a fresh, all-time high of ₹47,327 on Thursday. But on Friday, it declined and gave up almost all of its entire weekly gain.

However, the price remains above the important level of ₹45,000 and the major trend is bullish. Substantiating the uptrend, the RSI and the MACD indicators on the daily chart remain in the positive territory, but are showing signs of bulls losing strength.

On the weekly chart, the contract has formed a shooting star candlestick pattern — possibly indicating a trend-reversal.

However, ₹45,000 is a significant support. So, traders can initiate short positions with a stop-loss at ₹45,750 if it breaks below the support at ₹45,000.

Below that level, ₹44,000 can act as support.

MCX-Silver (₹42,806)

The price band between ₹43,800 and ₹44,500 has been acting as a resistance band, capping the rally of the May futures contract of silver on the MCX.

The 50-DMA, at ₹43,880, lies within the resistance band, making it a considerable hurdle. The daily RSI has been flat for the past two weeks, whereas the MACD indicator on the daily chart is signalling a shift in momentum towards the downside.

From the current levels, ₹42,000 can act as a considerable support. Hence, traders can initiate fresh short positions with a stop-loss at ₹45,000 if the contract breaches the support at ₹42,000. On the downside, the support levels can be spotted at ₹39,500. The subsequent support is at ₹37,000.

MCX-Copper (₹402.5)

The April futures contract of copper on the MCX gained last week, thus posting a third consecutive weekly gain, indicating good positive momentum. The contract has inched above the 21-DMA and closed marginally above the critical level of ₹400, where it coincides with the 50 per cent Fibonacci retracement level of the previous downtrend.

The daily RSI has been rising in tandem with the contract price; it remains above the midpoint level of 50. Also, the MACD indicator on the daily chart is in an upward trajectory.

Traders can buy the contract on declines with a stop-loss at ₹382. The immediate resistance is at ₹415, which coincides with the 50-day moving average and the 61.8 per cent Fibonacci retracement level.

A breakout of that level can take the price to ₹424.

NCDEX-Soybean (₹3,802)

The May futures contract of soyabean on the National Commodities and Derivatives Exchange was largely moving in a sideways trend during the previous week.

But the contract stays below the key level of ₹3,900, and as long as it does so, the chance of a price-recovery is bleak.

However, the contract is above both the 21- and 50-DMAs, and the daily RSI stays above the midpoint level of 50.

Moreover, the MACD indicator on the daily chart has entered the positive territory. These factors indicate bullish bias.

Hence, traders can go long on the contract with a stop-loss at ₹3,650 if the contract breaks out of the resistance at ₹3,900.

Above that level, the contract can potentially rally to ₹4,000 and ₹4,200.

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Published on April 19, 2020
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