Commodity Calls

Supports to limit the downside in MCX-Lead

Gurumurthy K BL Research Bureau | Updated on January 31, 2019 Published on January 31, 2019

The Lead futures contract on the Multi Commodity Exchange of India (MCX) has risen sharply in the past week breaking above the key resistance level of ₹145 per kg as expected. The contract made a high of ₹151.2 on Monday but it has slightly come off from there. The contract is currently trading at ₹148 per kg.

The 200-day moving average at ₹149 is restricting the contract from further upmove. As long as the contract trades below this resistance, an intermediate pull-back move to ₹145 is likely in the near term. A fall below ₹145 looks less probable at the moment as fresh buying interest is likely to emerge at lower levels.

An eventual break above the 200-day moving average resistance will boost the bullish momentum. Such a break can take the contract higher to ₹150 and ₹151 again. A further break above ₹151 will then increase the likelihood of the contract extending its rally towards ₹155 and ₹157 levels.

The bullish outlook will get negated if the contract declines below ₹145 decisively. In such a scenario, a fall to ₹143 or ₹142 is possible.

Trading strategy

Traders can make use of dips to go long at ₹146. Stop-loss can be placed at ₹142 for the target of ₹154. Revise the stop-loss higher to ₹148 as soon as the contract moves up to ₹151.

Global trend

The Lead (3-month forward) contract on the London Metal Exchange (LME) made a high of $2,129 per tonne on Monday. It is currently trading at $2,090. Resistance is at $2,130. As long as the contract trades below this hurdle, a dip to $2,030 is likely in the near term and a range-bound move between $2,030 and $2,130 can be seen for some time. A strong break above $2,130 is needed for the current uptrend to resume and trend to $2,100.

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