Technical Analysis

MCX-Lead could witness further weakening

Akhil Nallamuthu BL Research Bureau | Updated on February 10, 2020 Published on February 11, 2020

The spot price of Lead on the Multi Commodity Exchange of India slipped below the support at ₹152 in the past week. After making a low of ₹150.4, it closed the week at ₹151.1, hinting a bearish bias.

Following the trend of spot price, the February futures contract of Lead Mini declined and closed with a loss. Thus, the futures has closed in the red for the third consecutive week indicating that the bear trend is in momentum. Thus, the contract, which has been in a downtrend since last November, could further weaken from current levels.

Corroborating the bearish outlook, the MACD indicator on the daily chart continues to trade in the negative zone. However, the daily RSI is in the over-sold level, which calls for caution.

On the back of the major downtrend, if the price of contract drops, it could head southwards to ₹140. On the other hand, if the contract reverses the trend, it will face its first hurdle at ₹146.8 and above that level, ₹149 can act as an hindrance. The 21-day moving average (DMA) which coincides at that level make it a significant resistance. So, for the rally to establish a sustainable one, the contract should breach ₹149.

 

On the global front, the three-month rolling forward contract of Lead on the LME has been consolidating between $1,800 and $1,890. However, the overall trend is bearish and the price remains below both 21- and 50-DMAs. If the bears gain traction and the contract breaches the support at $1,800, it could decline to $1,752.

Trading strategy

The metal has been witnessing selling pressure for the past three months and the futures contract on the MCX has slipped below the support at ₹144.5. Given the scenario, traders can initiate fresh short positions on rallies in MCX-Lead Mini. Stop-loss can be placed at ₹148.

Published on February 11, 2020
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