Technical Analysis

MCX-Nickel exhibits bullish bias

Akhil Nallamuthu BL Research Bureau | Updated on May 27, 2020 Published on May 27, 2020

The June futures contract of nickel on the MCX has been in a consolidation phase over the last month. It has been oscillating between ₹900 and ₹960 and the contract should breach either of these levels to establish a trend. Last week it attempted to break out of ₹960 where it registered an intra-week high of ₹974.3. The contract is currently trading at ₹930.

Though the contract has been largely moving sideways, there are a few bullish indications. The 21-day moving average (DMA) has crossed over the 50-DMA and the daily relative strength index (RSI) stays above the midpoint level of 50. Also, the moving average convergence divergence (MACD) indicator on the daily chart remains in the positive territory. Taking these factors into account, it can be assumed that the contract is likely to trend towards.

On the back of the prevailing bullish bias, if the contract gathers momentum and breaches the upper boundary of the range, that is, ₹960, it might rise to ₹1,000. Above that level, ₹1,025 can act as a resistance. But if the contract weakens further and breaches the lower boundary of the range, that is, ₹900, the nearest support is at ₹860. Subsequent support is at ₹838.

On the global front, the three-month rolling forward contract of nickel on the London Metal Exchange (LME) broke out of the resistance at $12,340 last week and rallied to $12,800. However, the price moderated and is now hovering around $12,350. As long as the price is above $12,340, it is likely to remain bullish.

Trading strategy

While the price action of the contract on the MCX is sideways, globally, the metal seem to be displaying bullish bias as indicated by the contract on the LME. So, traders can initiate fresh long positions if the contract rallies past ₹960 — a key resistance level. Stop-loss can be at ₹900.

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

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Published on May 27, 2020
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