The May futures contract of nickel on the MCX broke below the support of ₹930 last week and the price moderated. But the contract seems to have found support at ₹900 and has been inching upwards this week. At ₹900, the 21- and 50-DMAs coincide, making it a strong support. Hence, as long as the price remains above ₹900, the contract can be approached with bullish bias.

As the price has rebounded, the daily Relative Strength Index (RSI) is showing a fresh uptick. It has also moved above the midpoint level of 50. Though the Moving Average Convergence Divergence (MACD) indicator lies in the positive territory, there are no fresh bullish indications yet.

On the back of the prevailing bullish bias, the contract is likely to rally where it will face its first hurdle in the form of a resistance band between ₹950 and ₹960. A breakout of that level can lift the contract to the important level of ₹1,000. But if the contract loses traction and begins to weaken, ₹900 can act as a support and arrest the decline as it is a critical base. A break below that level can intensify the sell-off. The subsequent support is at ₹860.

On the global front, the three-month rolling forward contract of nickel on the London Metal Exchange (LME) was unable to move above $12,340, from where the price was pulled down twice in the last two weeks. Moreover, the contract has slipped below $12,000 — an important level. Thus, the contract is exhibiting a bearish bias which can possibly weigh on the MCX contract.

Trading strategy

Though the contract on the MCX is showing signs of bullishness, the contract on the LME is indicating a bearish bias. So, rather than initiating long positions at current levels, traders can buy the contract if it breaks out of the resistance at ₹960. Stop-loss can be at ₹900.

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

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