Technical Analysis

MCX-Nickel could continue to drop further

Akhil Nallamuthu | Updated on November 13, 2019 Published on November 13, 2019

The price of nickel continued its downtrend in the past week. The November futures contract of the metal has broken below the support at ₹1,155, which has confirmed a lower low in daily chart. This is a bearish indication, potentially hinting a change in the medium-term trend to the downside. Currently it is trading at ₹1,139. A minor support is available at ₹1,126.

The daily relative strength index continues to show weakness and the moving average convergence divergence indicator is in the negative territory. Adding to that, the 21-DMA remains below the 50-DMA, another sign of bearishness.

On the back of prevailing weakness, the contract will most likely fall below the support at ₹1,126 and decline to the subsequent support at ₹1,066 in the upcoming days. On the other hand, if contract appreciates from the current level, it has a hindrance at ₹1,155 — a support-turned-resistance. Beyond that level, it will face a strong resistance in the band between ₹1,200 and ₹1,209. Until the futures breakout of those levels, the chances for a recovery is less likely.

The price of nickel on LME has also been in downtrend. The three-month rolling forward contract of the metal has slipped below a crucial support of $16,000 and is currently trading below the support at $15,450. The likelihood of depreciation from current level is more and the contract has its next support at $15,000. Below that level, the support is at $13,930. On the upside, the contract will face significant hurdle at $16,050.

Trading strategy

The price of MCX-Nickel futures and LME-Nickel has broken below a key support level, and thus has opened the door for further depreciation in the medium-term. So, one can continue to hold bearish view and make use of the rallies to take short positions. Hence, traders are recommended to sell MCX-Nickel November contract on pull-backs with a stop-loss at ₹1,210.

Published on November 13, 2019
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