Commodity Calls

Downtrend intact in MCX-Nickel

Gurumurthy K BL Research Bureau | Updated on November 14, 2018 Published on November 14, 2018

Make use of rallies to go short at ₹830 and ₹845


Nickel has been in a strong downtrend since June. This downtrend has gathered momentum since October. The futures contract on the Multi Commodity Exchange (MCX) has tumbled over 15 per cent from around ₹963 per kg in early October to the current levels of ₹813 per kg.

The contract has declined decisively below the key ₹850-₹860 support zone in the past week. The sharp fall below ₹850 has intensified the downtrend. The region between ₹850 and ₹860 will now serve as a strong resistance and restrict the upside in the contract.

A fall to ₹790 looks likely in the near term. If the contract manages to bounce from this support, a corrective rally is possible. However, such an intermediate bounce will face resistance in the ₹850-₹860 region. An eventual break below ₹790 will then increase the likelihood of the contract tumbling to ₹760 and ₹750 in the coming weeks.

The MCX-Nickel futures contract has to breach ₹860 decisively for the downside pressure to ease. In that case, it can target ₹900. But such a strong upmove looks unlikely at the moment.

On the global front, the outlook for Nickel on the London Metal Exchange (LME) is also negative. The LME-Nickel (3-month forward) has been struggling to rise past the psychological level of $12,000 per tonne over the last several days. It is currently trading at $11,345 per tonne. Resistance is in the $11,500-$11,700 region. As long as it trades below this zone, a fall to $11,000 is likely in the near term.

Trading strategy

Traders with a medium-term perspective can make use of rallies to go short at ₹830 and ₹845. Stop-loss can be placed at ₹875 for the target of ₹765. Revise the stop-loss lower to ₹810 as soon as the contract moves down to ₹790.

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

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