The May futures contract of nickel on the Multi Commodity Exchange (MCX) has lost about 11 per cent for the year. Last month, the contract registered a low of ₹828 and then it began to recover.

On Wednesday, though the contract hit an intra-day high of ₹972.5, by closing at ₹920.1, it failed to break out of the resistance at at ₹965. Notably, the 61.8 per cent Fibonacci retracement level of the prior downtrend lies at ₹958. Hence, the price area between ₹958 and ₹965 will act as a resistance band. However, as long as the price remains above ₹900, there is a possibility of going up further.

The contract price has inched above both 21- and 50-day moving averages (DMAs). Also, the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicator on the daily chart indicate a bullish bias. While the RSI is above the midpoint level of 50, the MACD has entered the positive territory.

On the upside, the immediate hurdle is the resistance band between ₹958 and ₹965. A breakout of these levels can take the contract to ₹1,000. But if the contract breaches the support at ₹900 and declines, it will find support at ₹880 — its 21-DMA.

On the global front, the three-month rolling forward contract of nickel on the London Metal Exchange (LME) rallied last week and moved past the important level of $12,000. This has opened the door for further strengthening. A rally in global price can also lift the contract price in MCX.

Trading strategy

The contract is trading above the key base of ₹900, and the recent trend has been bullish corroborated by an uptrend in the global price. Hence, the contract can be expected to advance from current levels. So, traders can buy the contract with stop-loss at ₹875.

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

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