The consolidation phase in the May futures contract of lead on the MCX has now gone beyond a month where it has been oscillating between ₹129 and ₹137. But the contract price is below both the 21- and 50-day moving averages — a bearish bias; and for the current year, the contract has lost about 14 per cent.

The daily RSI is showing a fresh downtick, remaining below the midpoint level of 50. The Moving Average Convergence Divergence (MACD) indicator on the daily chart, though inching up, remains in the negative territory. Also, the trajectory is flattening, indicating that bulls are unable to build enough momentum.

If the contract weakens and breaks below the lower boundary of the range at ₹129, the nearest support is 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 face a hurdle at ₹142 — the 50 per cent Fibonacci retracement level of the previous downtrend. Beyond that level, resistance can be seen at ₹150.

On the global front, the three-month rolling forward contract of lead on the LME took support at $1,610 during the first week of the current month. It has been gaining gradually over the past week and is currently trading at $1,650. But for the contract to reverse the trend, the price should break out of the resistance at $1,720. In such a case, it might lift the contract on the MCX as well.

mcx-leadjpg
 

Trading strategy

The contract on the MCX has been consolidating with a bearish bias. As indicated by the contract on the LME, the price of the metal has been sluggish globally as well. Considering the factors above, traders can initiate fresh short positions with stop-loss at ₹137, if the contract breaches the support at ₹129.

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

Related Topics
comment COMMENT NOW