Technical Analysis

MCX-Nickel in sideways trend

BL Research Bureau | Updated on May 20, 2020

The May futures contract of nickel on the MCX has been advancing since the beginning of the week after it took support at ₹900. The price has moved above the 21-day moving average (DMA) as well. But on the daily chart the contract seem to be moving in a sideways trend oscillating in between ₹900 and ₹960 for over a month. Notably, the price area between ₹950 and ₹960 is a resistance band. Hence, the next leg of trend cannot be confirmed until the price remains within ₹900 and ₹960.

The trend prior to consolidation has been bearish and the contract currently trades with 10 per cent year-to-date loss at ₹943.

Since the prevailing trend is horizontal, the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicators on the daily chart has been flat within their respective positive territory.

If the contract rallies and breaks out of the resistance at ₹960, it can potentially lift the price towards the important level of ₹1,000. A breakout of that level can take the contract to ₹1,038. But if the contract weakens, it will find support at the lower boundary of the range at ₹900. The 50-DMA at ₹906 can also act as a cushion. A break below ₹900 can intensify the sell-off dragging the contract to ₹860.

On the global front, the three-month rolling forward contract of nickel on the London Metal Exchange (LME) is consolidating in the range between $11,850 and $12,340. The contract currently tests the resistance at $12,340 and a breakout can turn the medium-term trend bullish.

Trading strategy

The price action of the respective contracts on the MCX and LME are indicating a lack of trend and have been in a consolidation phase for little over a month. So, traders can adopt range trading strategy on the MCX-Nickel until it moves out of the range.

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

Published on May 20, 2020

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