High Five: Aluminium, Copper, Lead, Nickel, Zinc

Aluminium is stuck inside a broad range

The MCX-Aluminium futures contract has been broadly range-bound between ₹97 and ₹112 per kg since January. Within this, the contract has been stuck inside a narrow range of ₹102 and ₹106 over the past four weeks. A fall to test ₹102 looks likely in the near term. A strong break and a decisive close below ₹102 will increase the possibility of the contract revisiting ₹97 in the coming weeks. On the charts, the possibility of such a fall is high. Short-term traders can go short on a break below ₹102. Stop-loss can be kept at ₹104.5 for the target of ₹98. A breakout on either side of ₹97 or ₹112 will decide the next leg of move. If the contract declines below ₹97 , then the fall can extend up to ₹95 or even ₹93. On the other hand, an upward reversal from ₹97 will keep the broader range intact. In such a scenario, the contract can move higher to ₹112 once again. Only a strong break above ₹112 will turn the outlook bullish. The next targets will be ₹115. Further break above ₹115 can see ₹120 or even ₹125 thereafter.

Copper hovers above a crucial range support

The MCX-Copper futures contract has been range-bound between ₹305 and ₹340 per kg since April. Over the past three weeks, it has been hovering above the lower end of the range. The 21-week moving average resistance at ₹319 is limiting the upside and has kept it inside a narrow band of ₹305-₹319 over the last three weeks. A strong break and a decisive weekly close above this resistance, while keeping the overall sideways move intact, can take the contract higher to ₹333 . Further break above ₹333 can take it higher to ₹340. Short-term traders can go long after a decisive break above ₹319. Stop-loss can be placed at ₹314 for the target of ₹332. On the other hand, if the contract fails to break above ₹319, it can continue to trade between ₹305 and ₹319 for some more time. In such a scenario, there is a high possibility for it to break below ₹305. Such a break will increase the downside pressure and drag it lower to ₹300. A fall below ₹300 can take the contract to the level of ₹292 thereafter.

Immediate outlook unclear for Lead

The immediate outlook for the MCX-Lead futures contract is not clear. It has been stuck inside a narrow range of ₹110 and ₹120 per kg since April. The contract tested the lower end of this range in the last week of May and has reversed higher since then. There is a high probability for the contract to rise to ₹120 — the upper end of the range in the near term. If the contract manages to break above ₹120, it can rise further to ₹122 — the 200-week moving average resistance. Only a strong break above ₹122 will turn the outlook bullish. The next target will be ₹125. Further break above ₹125 can see the contract extending its rally to ₹130. On the other hand, inability to break above ₹120 can keep the contract inside the ₹110-120 range, dragging it lower to ₹110. The outlook will turn negative if the contract falls below ₹110. The ensuing targets on such a fall will be ₹107 and ₹105. This fall will also increase the danger of the contract revisiting the psychological ₹100 level thereafter.

Nickel consolidates within the long-term downtrend

The long-term downtrend in MCX-Nickel that has been in place since the 2014 high of ₹1,280 per kg. The contract has been consolidating between ₹520 and ₹650 since December 2015. The contract is oscillating around the 21-week moving average which is currently at ₹582. This suggests that the contract can remain inside this range for some more time. A breakout on either side of ₹520 or ₹650 will decide the next leg of move for the contract. A strong break above ₹650 can take it higher to ₹700. It will be the first sign of a trend reversal and will also ease the downside pressure. A decisive weekly close above ₹700 will confirm the trend reversal. Such a break can take the contract higher to ₹800 and ₹810 — the 38.2 per cent Fibonacci retracement resistance level. On the other hand, if the contract falls below ₹520, it can trend lower to ₹495. Further break below ₹495 can drag it to ₹480. It will also increase the danger of the contract revisiting the previous low of ₹442 made in December 2008.

Zinc continues its uptrend

The Zinc futures contract continues to outperform the others in the metals complex. The contract surged 4.7 per cent last week. It has skyrocketed 26 per cent so far this year. The 21-week moving average is on the verge of crossing above the 200-week moving average which could add strength to the rally. Immediate support is at ₹130 and a subsequent strong one lies between ₹125 and ₹120. The 21-month moving average is at ₹125 which is likely to limit the downside in the short term. Immediate resistance is at ₹135. A strong break above it can take the contract higher to ₹140 or even ₹145. Traders can make use of dips to go long near ₹130. Stop-loss can be placed at ₹122 for the target of ₹142. Accumulate longs if the contract declines below ₹130 and falls to ₹125. Revise the stop-loss higher to ₹137 as soon as the contract moves up to ₹140. The outlook for the contract will turn bearish only if it breaks below ₹120 decisively. But such a strong fall looks unlikely now.

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