Commodity Calls

Bias is turning negative for MCX-Nickel

Gurumurthy K | Updated on December 12, 2018 Published on December 12, 2018

Nickel futures contract on the Multi Commodity Exchange (MCX) seems to be lacking strength. The contract fell to a low of ₹762 per kg last week on Thursday. Though it has bounced higher from the low, the upward reversal is not strong. The contract made a high of ₹791 on Tuesday and has come-off slightly from there. It is currently trading at ₹777 per kg.

The 21-day moving average resistance at ₹783 is restricting the contract from a strong rally. Also, there is another key resistance is at ₹800. The outlook will turn positive only if the contract breaks above ₹800 decisively. Such a break will then ease the downside pressure and will take the contract higher to ₹830. But the price action over the last few days leaves the bias negative for the contract. It also keeps the possibility high of the contract to remain below ₹800.

As long as the contract trades below ₹800, a dip to ₹750 is likely in the near term. A strong break below ₹750 can take the contract initially lower to ₹740. A further break below ₹740 will then increase the likelihood of the downmove extending to ₹720 or even lower thereafter.

Trading strategy

Traders who have taken long positions at ₹781 and ₹773 should remain cautious. Revise the stop-loss higher to ₹763 and book profits at ₹790.

Global trend

The downtrend in nickel (3-month forward) contract on the London Metal Exchange (LME) remains intact. The contract has failed to sustain the break witnessed earlier this month above $11,000 per tonne. It made a high of $11,440 and has come-off from there. It is currently trading at $10,770 per tonne.

Support is at $10,720. As long as the LME-Nickel contract trades below $11,000, there is a strong likelihood of the contract breaking below $10,720 in the coming days. Such a break will drag the contract lower to $10,400 or even $10,000 thereafter.

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

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