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The Nickel futures contract on the Multi Commodity Exchange of India (MCX) extended its fall breaking below the psychological level of ₹900 per kg as expected in the past week. The contract tumbled 4 per cent intra-week and hit a low of ₹855.6 on Tuesday. However, it has bounced slightly higher and is currently trading at ₹861 per kg.
The contract is taking support at ₹855. As long as it remains above this support, there is a strong likelihood of seeing a corrective rally to ₹880 and ₹885 in the near term. If the contract manages to breach ₹885 decisively, then the relief rally can extend to ₹900 and ₹910 over the short term.
On the other hand, if the contract reverses lower from ₹885, a fresh leg of down-move is possible. In such a scenario, the downtrend that began in early October will remain intact. This fresh leg of down move will increase the likelihood of the contract breaking below the support level of ₹855. Such a break can then drag the contract lower to ₹810 and ₹800 levels.
Trading strategy
High risk appetite traders can make use of rallies and go short at ₹870 and ₹880. Stop-loss can be placed at ₹905 for the target of ₹800. Revise the stop-loss lower to ₹860 as soon as the contract moves down to ₹845.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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