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The past week was very volatile for the Nickel futures contract on the Multi Commodity Exchange (MCX). The contract had surged over 3 per cent initially, to touch a high of ₹612.6 a kg on Monday.
However, it failed to sustain higher and has come off from this level wiping out all the gains made during the week. It is currently trading at ₹592.5.
Immediate support is at ₹587, which is likely to be tested in the near term. A break below this support level will increase the possibility of the contract extending its downward move to ₹581 — the 21-day moving average — or ₹579 — the 61.8 per cent Fibonacci retracement support level.
The region between ₹581 and ₹579 is a strong support, which is likely to halt the current down move.
However, a further fall below ₹579 is less likely. An upward reversal from this support zone will see the contract rallying to ₹600 levels. A strong break and a decisive weekly close above ₹600 can boost the momentum. Such a break will increase the likelihood of the contract extending its upward move to ₹620 or even ₹630 levels thereafter.
Short-term traders can wait for dips and go long near ₹582. A stop-loss can be placed at ₹575 for the target of ₹595. Revise the stop-loss higher to ₹585 as soon as the contract moves up to ₹590.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading
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