Technical Analysis

MCX-Lead tests a key support

Akhil Nallamuthu BL Research Bureau | Updated on March 16, 2020 Published on March 16, 2020

The March futures contract of Lead mini on the MCX has been oscillating in a sideways trend between ₹139.5 and ₹145.6 for the past three weeks. Despite consolidation, the price exhibits a bearish bias as it trades below the 21- and 50-DMAs. However, next leg of trend cannot be confirmed unless it breaches either ₹139.5 or ₹145.6.

The daily RSI continues to tread down along with the contract price and the MACD indicator on the daily chart, which is already in the bearish zone, is hinting that the downtrend is regaining momentum. Notably, the major trend remains bearish.

On the back of the major downtrend, if the contract breaches the support at ₹139.5, the price could drop to ₹133 in the near-term. Below that level, ₹130 can act as a support. On the other hand, if the contract manages to advance taking support at ₹139.5, it will most likely rally to ₹145.6. Above that level, the medium-term trend can turn bullish and the contract can rise to ₹150 — the 61.8 per cent Fibonacci retracement level of prior downswing.

On the global front, the three-month rolling forward contract of Lead on the LME broke below a key support at $1,800 last week, opening the door for further decline. On the the daily chart, the contract registered a fresh low of $1,738, which is also the lowest since July 2016. Thus, the contract is bearish and so the price is likely to drop further towards the support band between $1,700 and $1,682. Support below that level is at $1,600.

Trading strategy

Though the March contract of MCX-Lead mini has been trading between ₹139.5 and ₹145.6, the overall trend is bearish. But since ₹139.5 is a considerable support, a decisive close below that level is a prerequisite to initiate fresh short positions. Traders can sell the contract below ₹139.5 and place stop-loss at ₹145.

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Published on March 16, 2020
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