Commodity Calls

MCX-Nickel: Resistance to cap the corrective rally

Gurumurthy K BL Research Bureau | Updated on November 21, 2018 Published on November 21, 2018

The downtrend in the Nickel futures contract on the Multi Commodity Exchange (MCX) remains intact. The contract has been beaten down consistently since mid-October. The contract made a high of ₹963.3 per kg in October and has been falling continuously since then. This downtrend has intensified after the contract declined below the key support level of ₹840 earlier this month. The MCX-Nickel futures contract tumbled 3 per cent in the past week and is currently trading at ₹790 per kg.

The downtrend is intact. However, there is a possibility of an intermediate bounce in the near term. The key 100-week moving average support is near current levels at ₹789. If the contract manages to bounce from this support, a corrective rally to ₹830 or ₹840 is likely in the near term. However, the region between ₹830-₹840 will act as a strong resistance and will cap the upside. Fresh sellers are likely to emerge at higher levels and restrict the upmove.

As such, a pull-back from the ₹830-₹840 resistance region and a subsequent break below ₹789 will see the downtrend extending towards ₹745 and ₹740 in the coming weeks.

On the global front, the Nickel (3-month forward) contract on the London Metal Exchange (LME) is also on a strong downtrend. The contract extended its downmove as expected in the past week to test the psychological level of $11,000 per tonne. It is currently trading at $11,095 per tonne. If it sustains above $11,000, an upmove to $11,500 is possible in the near term. But a strong break below $11,000 will increase the downside pressure and will drag the contract lower to $10,600 and $10,550 in the coming weeks.

Trading strategy

Traders with a medium-term perspective can go short in the MCX-Nickel futures contract on rallies at ₹805,₹820 and ₹830. Stop-loss can be placed at ₹845 for the target of ₹745. Revise the stop-loss lower to ₹790 as soon as the contract moves down to ₹780.

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

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