Technical Analysis

MCX-Lead: Go long in declines

Akhil Nallamuthu BL Research Bureau | Updated on June 22, 2020

The July futures contract of lead on the Multi Commodity Exchange (MCX), which has been moving in a narrow range between ₹132 and ₹137 since April, broke out of the range during early June. Since then, the contract has been gradually gaining and is now trading around ₹142.

The price is well above the 21-day moving average (DMA) where the 21-DMA is above the 50-DMA — a bullish indication. Affirming the bullish bias, the Moving Average Convergence Divergence (MACD) indicator on the daily chart is in the positive region and retains the upward trajectory. Also, the daily Relative Strength Index (RSI), though flat, is above the midpoint level of 50. Thus, the contract can be bullish until it stays above ₹137.

As the contract appears bullish, the price is likely to gain further from the current levels. While the price area between ₹148 and ₹150 can be the immediate hurdle, a breakout of this resistance band can take the contract to ₹155. On the other hand, if the contract softens, it has a support at ₹137. The 50-DMA lies at this level, making the support significant. A break below this level could drag the contract to ₹132.

On the global front, the three-month rolling forward contract of lead on the London Metal Exchange (LME) rallied last week and rallied past the resistance at $1,750, opening the door for further strengthening. It is currently testing the resistance of $1,800. As the trend is bullish, it is likely to breakout of this level. This can positively influence the contract on the MCX as well.


Trading strategy

The contracts on the MCX and LME have been in a bull trend since the beginning of June and both the contracts remains above their respective support levels. So, traders can be bullish and initiate fresh long positions on the MCX-Lead on declines with stop-loss at ₹137.

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

Published on June 22, 2020

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