Technical Analysis

MCX-Lead tests a key barrier

Yoganand D BL Research Bureau | Updated on December 06, 2018 Published on December 06, 2018

The MCX-Lead futures contract on the Multi Commodity Exchange of India has been on a short-term downtrend since encountering a key resistance at ₹155 per kg in mid-October.

The contract breached a key support at ₹145 while trending down. Medium-term trend is also down for the contract. However, the contract found support at in the ₹130-135 band in late November and began to move higher. The contract is in a corrective up move and currently tests a key resistance at ₹140 and trades at ₹139 per kg.

An emphatic break above the immediate resistance level of ₹140 can strengthen the corrective up move and take the contract higher to ₹145. But to alter the short-term downtrend, the contract needs to decisively breach the vital trend-deciding resistance at ₹145. A further break above the level will alter the short-term downtrend and take the contract northwards to ₹150 and then to ₹155 in the short to medium term.

That said, the medium-term downtrend that has been in place since June this year will remain in place as long as the contract trades below ₹155. A strong break above this barrier will alter the medium-term downtrend and push the contract upwards to ₹160 and ₹164 levels. On the other hand, failure to move beyond the crucial resistance level of ₹145 will keep the contract oscillating in the wide band between ₹130 and ₹145.

On the downside, a conclusive fall below the significant long-term support level of ₹130 will underpin the downtrend and drag the contract down to ₹125 and ₹122 levels over the medium-term. Traders with a short-term view can take long positions on a strong rally above ₹140 with a stop-loss at ₹137, for a target of ₹145.

Global trend

The Lead (three-month forward) contract on the LME continued to trade range-bound in the band between $1,900 and $2,030 per tonne over last one month. The contract now tests the upper boundary. A break above $2030 can take it higher to $2,100 and then to $2,150 in the short term. Key supports are at $1,950 and $1,900 levels.

(Note: The recommendations are based on technical analysis and there is a risk of loss in trading.)

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Published on December 06, 2018
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