Commodity Calls

Upmove is gaining strength in MCX-Lead

Gurumurthy K BL Research Bureau | Updated on January 24, 2019 Published on January 24, 2019

The Lead futures contract on the MCX seems to be gaining momentum. The contract has surged 3.5 per cent in the past week breaking above the key 100-day moving average resistance level of ₹142.6 per kg. It is currently trading at ₹144.5 per kg.

An immediate resistance is near current levels at ₹145. The MCX-Lead futures contract is likely to breach this hurdle. Such a break can take the contract higher to ₹149 and ₹150 in the coming days.

The 100-day moving average at ₹142.6 will now act as a key support. Intermediate dips, if seen, is likely to be limited. The outlook will turn negative only if the contract breaks below ₹142.6. The next target is ₹140. A further break below ₹140 will then increase the likelihood of the fall extending towards ₹137 or even ₹135 thereafter. However, such a sharp fall looks less likely at the moment as the indicators on the charts are giving positive signals.

The 21-day moving average has crossed over the 55-day moving average. This is a positive signal indicating that the downside could be limited and the current upmove is likely to continue. As such, this leaves the possibility high of the contract breaking above ₹145 in the coming days.

Trading strategy

Traders can make use of dips to go long at ₹142 and ₹140. Stop-loss can be placed at ₹138 for the target of ₹149. Revise the stop-loss higher to ₹144 as soon as the contract moves up to ₹146.

Global trend

The outlook for the Lead (3-month forward) contract on the London Metal Exchange (LME) is positive. The contract has risen breaking above the psychological resistance level of $2,000 per tonne. It is currently trading at $2,027 per tonne.

The region between $2,000-$1,990 is a strong support. As long as the contract trades above this support zone, there is a strong likelihood of it rallying towards $2,075 in the coming days.

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

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