Technical Analysis

MCX-Lead in consolidation mode

Akhil Nallamuthu BL Research Bureau | Updated on May 19, 2020

The May futures contract of lead on the MCX has been in a consolidation phase since the past two months, oscillating between ₹129 and ₹137. The price has been witnessing a decline since the beginning of the month, but the support at ₹129 is acting as a cushion, arresting a decline below this level. Currently trading at ₹131.6, the contract has lost about 14 per cent for the year.

As the contract continues to remain below the 21- and 50-day moving averages, the inherent bias is towards the downside. The daily RSI’s midpoint level of sub-50 corroborates it. But the MACD indicator on the daily chart is staying flat in the negative territory.

On the back of the prevailing bearish momentum, if the contract breaches the lower boundary of the range at ₹129, it is likely to fall to ₹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, which coincides with the 38.2 per cent Fibonacci retracement level of the previous downtrend. Beyond that level, resistance 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) faced selling pressure last week. The price has been declining and is currently testing the key support at $1,600. If the price slips below that level, a fresh round of selling can be expected. This could bring down the price of the contract on the MCX as well.

Trading strategy

While the major trend of the metal is bearish, the respective futures contracts on the MCX and LME are hovering around a support level. So, traders can initiate fresh short positions if MCX-Lead decisively breaks below ₹129. Stop-loss can be placed at ₹136.

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

Published on May 19, 2020

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