Technical Analysis

Outlook turns bearish for MCX-Lead

Akhil Nallamuthu BL Research Bureau | Updated on January 27, 2020 Published on January 28, 2020

The spot price of Lead on the MCX has been in a sideways trend, oscillating between ₹152 and ₹159 since November last year.

However, the futures contract hints at a possible downtrend as it has breached an important support. After fluctuating between ₹151 and ₹153.5, the February contract of Lead Mini has broken below the lower boundary of the range at ₹151. The contract started to decline after testing the 50-DMA resistance, which coincided with the upper boundary of the range at ₹153.5. On Monday, it slipped below ₹150.

Corroborating the negative outlook, the MACD indicator on the daily chart is indicating signs of bears gaining traction. Notably, it remains in the negative region. Also, the daily RSI shows a fresh downtick. However, one should be cautious as the RSI is inching towards oversold territory.

If the bear trend continues, the contract will most likely fall further where ₹145 can act as the nearest support. If that level is taken out, it can extend the down swing to ₹140. On the other hand, if the contract reverses the trend, the price area between ₹150 and ₹151 can act as a resistance band. Above that level, it can appreciate to ₹153.

On the global front, the three-month rolling forward contract of Lead on the LME seems to have resumed the downtrend after the contract failed to sustain above $2,000. After registering a two-month high of $2,038 earlier this month, the contract declined and closed at $1,940 last week, below the support at $1,950. The price may descend down to $1,880 in coming days.

Trading strategy

As the futures contract in MCX has made a fresh breakdown and the downtrend on the LME seems to have resumed, one can take a bearish outlook on the metal. Traders are thus recommended to initiate fresh short positions with a stop-loss at ₹152.

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Published on January 28, 2020
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