The May futures contract of lead on the MCX has been oscillating between ₹129 and ₹137 since the second week of March. It has been traversing across the 21-DMA for the past few trading sessions. The contract is currently trading at around ₹133 and the year-to-date loss stands at about 13 per cent. Noticeably, the major trend of the metal is bearish.

As the price has been tracking a sideways path, the daily Relative Strength Index (RSI) remains flat. But it stays below the midpoint level of 50. On the other hand, the Moving Average Convergence Divergence (MACD) indicator on the daily chart, is in the negative territory despite some upward movements.

On the back of fresh bearish momentum, if the contract breaches the support at ₹129, it might find support at ₹122. A break below that level can drag the contract to ₹118. On the contrary, if the contract breaks out of the upper boundary of the range at ₹137, it will immediately face a hurdle at ₹140, where the 50-day moving average and 38.2 per cent Fibonacci retracement level of the previous downtrend coincides. Beyond that level, resistance levels can be spotted at ₹145 and ₹150.

On the global front, the three-month rolling forward contract of lead on the London Metal Exchange (LME) was unable to break the resistance at $1,720 twice. The contract then started to moderate and breached the important support of $1,700. The price is approaching its previous support at $1,610 and a break below that level can intensify the sell-off. This can potentially weigh on the MCX contract.

Trading strategy

Even as the major trend of the metal is bearish, the MCX contract has been consolidating of late. Also, globally the price is trading near its prior low. Hence, traders can initiate fresh short positions with a stop-loss at ₹137, if it breaches the support at ₹129.

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

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