The resistance around ₹780 per kg has held well for the Nickel futures contract on the Multi Commodity Exchange (MCX).
The contract tested this resistance last week by making a high of ₹778.9 per kg on Friday and has reversed sharply lower from there. It has tumbled over 6 per cent from this high and is currently trading around ₹726/kg.
The sharp fall in the past week has dragged the contract well below the key support level of ₹740.
Immediate support is at ₹718 (100-day moving average) which is likely to be tested in the coming days. If the contract manages to bounce from this support, a relief rally to ₹730 and ₹740 is possible.
However, further break above ₹740 is unlikely at the moment as rallies to ₹730 and ₹740 levels may find fresh sellers coming into the market.
Also there is a head and shoulder reversal pattern on the daily chart. This is a bearish pattern.
The neckline resistance of this pattern is at ₹740 which is likely to cap the upside in the short-term.
So,as long as the contract trades below ₹740, the outlook will remain bearish. An eventual break below the 100-day moving average support level of ₹718 will increase the likelihood of the contract falling to ₹700 and ₹680 in the coming weeks.
Traders with a medium-term perspective can go short at current levels and also on rallies at ₹735.
Stop-loss can be placed at ₹748 for the target of ₹685. Revise the stop-loss lower to ₹715 as soon as the contract moves down to ₹705.
The outlook will turn positive only if the contract breaks above ₹740 decisively. The next targets are ₹755 and ₹770.
But such a strong rally looks unlikely at the moment.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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