Technical Analysis

MCX-Nickel hovers around a support

Akhil Nallamuthu | Updated on November 27, 2019

The spot price of nickel on the Multi Commodity Exchange (MCX) began its rally from ₹837 in June and appreciated to ₹1,346.6 — its 52-week high, in September. But the price started to decline and is currently trading at ₹1,091, a 50 per cent correction of the previous rally.

Like the spot price, the December futures contract of nickel has been on a decline since September. The current market price of the contract is ₹1,064 and the bears seems to have taken a pause as it is trading sideways now.

By plotting the relative strength index in the daily chart, we can observe that the index is at over-sold levels and the moving average convergence divergence indicator indicates a loss of bearish momentum. Thus, the contract may get into a consolidation phase even if there is no immediate revival in price.

In case the contract continues to weaken and breaks below the support at ₹1,050, there is minor support at ₹1,027. Below that level, ₹1,000 will act as a support. On the other hand, if the contract witnesses some profit-booking and advances, it will face a hurdle at ₹1,106 — the 23 per cent Fibonacci retracement level of previous down swing. Resistance beyond that level is at ₹1,140.8.

Similar to the trend on the MCX, the price of three-month rolling forward contract of nickel on the LME seems to have taken a pause after a considerable downtrend. At current market price of $14,600, the contract manages to stay above the support at $14,388 — the 61.8 per cent Fibonacci retracement. On short-covering, the contract may rise to $15,000 in the upcoming sessions. However, a decline from current level as an extension of prevailing bearishness will drag the contract to $13,930.

Trading strategy

Though MCX-Nickel futures is in a downtrend, ₹1,050 can act as a support, arresting further decline. So, traders are recommended to initiate fresh short positions with a tight stop-loss, only if price decisively breaks below that level.

Published on November 27, 2019

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