Technical Analysis

MCX-Nickel drops below range

Akhil Nallamuthu BL Research Bureau | Updated on February 26, 2020 Published on February 26, 2020

PO23_nickle

The March futures contract of Nickel on the Multi Commodity Exchange of India (MCX), which has been oscillating in a range between ₹930 and ₹966 for past one month, has broken below the lower boundary of the range on Monday. This has opened the door for further weakness. Moreover, the trend prior to the consolidation has been bearish and with the fresh breakdown, the daily price action indicates bearish continuation.

The price remains below the 21-day moving average, maintaining the short-term outlook negative. The Moving Average Convergence Divergence (MACD) indicator on the daily chart too shows considerable downward momentum as it extends further into the bear zone. On the other hand, the daily Relative Strength Index (RSI) is hinting at loss of bearish momentum. But it remains in the bearish territory.

As the contract has confirmed a break down and the overall trend is bearish, it will most likely decline from current levels. The price can be expected to drop to ₹900 in the near-term. A break below that level can drag the contract to ₹872. But if the contract is able to reverse the trend, it will face a significant hurdle at ₹966. Above that level, the medium-term trend can turn bullish. The subsequent resistance is at ₹1,000.

On the global front, the price of three-month rolling forward contract of Nickel on the London Metal Exchange (LME) consolidates between $12,500 and $13,365. However, the major trend remains bearish and the daily RSI shows a fresh downtick. Support below $12,500 is at $12,000 whereas resistance above $13,365 is at $13,740.

Trading strategy

The futures contract of Nickel on the MCX has confirmed a fresh break down indicating that the contract is likely to weaken further from current levels. Moreover, the major trend is bearish. Hence, traders can initiate fresh short positions on rallies with a stop-loss at ₹950.

Published on February 26, 2020
This article is closed for comments.
Please Email the Editor