Technical Analysis

MCX-Nickel likely to fall further

Akhil Nallamuthu BL Research Bureau | Updated on December 18, 2019 Published on December 19, 2019

The December futures contract of Nickel in MCX broke out of the range between ₹962 and ₹1,000 during the past week. The rally took the price to ₹1,038 and the contract seems to struggle to move beyond that level. Thus, rather than a trend reversal, the rally looks like a pull back. Noticeably, the contract remains below the 21-day moving average, keeping the short-term outlook negative. Moreover, the major trend remains bearish, increasing the probability of the contract resuming its bear trend.

Indication by the MACD indicator works in favour of the metal, as it has moved into the positive territory. However, the RSI on the daily chart is below the midpoint level of 50. The latest down-tick along the price hints at further weakening. Importantly, for the rally to sustain, it has to sail past the key level of ₹1,050. Until then it can be approached with bearish bias.

If the contract resumes its bear trend and weakens, it will most likely retest its prior low at ₹961. Below that level, the contract may attract more selling, dragging the price to ₹924. On the other hand, if price moves northwards, it will face hindrance at ₹1,050. Further appreciation can turn the medium-term trend bullish where the contract might appreciate to ₹1,076.

The price of three-month rolling forward contract of nickel on the London Metal Exchange witnessed a minor rally in the past week. After briefly trading above the critical level of $14,000, the contract fell back below it. Until the contract decisively breaks above $14,000, it can be approached with bearish bias. From the current level, the key support and resistance are at $13,375 and $14,675, respectively.

Trading strategy

MCX-Nickel futures seems to have resumed its bear trend after the corrective rally facing a roadblock. Hence, traders are advised to initiate fresh short positions on rallies with ₹1,055 as stop-loss.

Published on December 19, 2019
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