Commodity Calls

MCX-Lead is likely to extend its downtrend

Gurumurthy K BL Research Bureau | Updated on July 19, 2018 Published on July 19, 2018

The Lead futures contract on the Multi Commodity Exchange (MCX) extended its fall breaking below a key long-term support level of ₹152 per kg last week. The contract has tumbled over 5 per cent in the past week from around ₹153 per kg. It is currently trading at ₹145 per kg.

The downtrend is intact. The region between ₹150 and ₹152 will now act as a strong resistance band and can cap the upside for the contract. An intermediate bounce to this resistance zone is likely to find fresh sellers coming into the market.

Indicators on the charts are also negative. The 21-day moving average has crossed below the 55- and 200-day moving averages and is on the verge of crossing below the 100-day moving average. This is a bearish sign indicating that the downtrend is strengthening while the upside is limited in the contract.

A fall to ₹140 is likely in the coming days. A bounce from ₹140 can trigger a relief rally to ₹145 or even ₹150. But the bias will continue to remain bearish. An eventual break below ₹140 will then increase the likelihood of the contract tumbling to ₹135 or even ₹130 over the medium term.

The region between ₹130 and ₹128 is a strong long-term support zone which has the potential to halt the current downtrend. Hence, further fall breaking below this support zone is unlikely.

Trading strategy

Traders with a medium-term perspective can make use of bounces and go short at ₹147, ₹150 and ₹152. Stop-loss can be placed at ₹155 for the target of ₹135. Revise the stop-loss lower to ₹145 as soon as the contract moves down to ₹141.

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

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