The April futures contract of Nickel on the Multi Commodity Exchange (MCX) lost about 22 per cent for the year when it registered a low of ₹800 last month. But then the contract began to recover.

On Wednesday, the contract broke out of the resistance band between ₹880 and ₹900, opening the door for further strengthening. It also breached the 38.2 per cent Fibonacci retracement level which lies at ₹895. The contract is currently hovering at the 50-day moving average.

Corroborating the bullish bias, the daily Relative Strength Index (RSI) has been rising along the contract price and has crossed above the midpoint level of 50, indicating good bullish strength. The Moving Average Convergence Divergence indicator on the daily chart is in a considerable upward trajectory, signalling an upward momentum.

As the contract has breached a key resistance band, the price is likely to go up further. The immediate hurdle is at ₹950 – the 61.8 per cent Fibonacci retracement level of the previous trend. Notably, ₹970 is a resistance. Hence, the price band between ₹950 and ₹970 can act a resistance band. A breakout of these levels can lift the contract to ₹1,000. On the other hand, if the contract begins to descend and breaches ₹880, if might possibly decline to ₹850.

On the global front, the three-month rolling forward contract of Nickel on the London Metal Exchange (LME) has extended the gain after breaking out of the consolidation range last week. The contract has risen above $11,800 and is likely to test $12,000. A rally on the LME can positively influence the price on the MCX.

Trading strategy

Following the breakout of ₹900, the trend might have turned positive at least in the short term. This is substantiated by the recent recovery in global price of the metal. Hence, traders can go long in the contract on declines with stop-loss at ₹850.

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