Commodity Calls

Supports to limit the downside in MCX-Nickel

Gurumurthy K BL Research Bureau | Updated on January 24, 2019 Published on January 23, 2019

The Nickel futures contract on the Multi Commodity Exchange (MCX) inched higher in the past week as expected. However, the upmove was short-lived as the contract faced resistance at around ₹843 per kg. It made a high of ₹843.7 on Monday and has come-off from there. It currently trades at ₹829.

The 100-day moving average resistance at ₹841 has halted the current upmove. Though the near-term outlook is mixed, the broader view remains positive. Key support is in the ₹810-₹800 region.

 

 

The indicators on the charts are also positive. The 21-day moving average is on the verge of crossing over the 55-day moving average. This is a positive signal indicating that the downside could be limited. This leaves the possibility less of the contract breaking below ₹800. As such an eventual break above the ₹840-₹845 region can trigger a fresh rally to ₹865 and ₹870.

Trading strategy

Risk appetite traders who have taken long positions at ₹825 and ₹815 can hold it. Retain the stop-loss at ₹795 for the target of ₹870. Revise the stop-loss lower to ₹835 as soon as the contract moves up to ₹855.

Global trend

The nickel (3-month forward) contract on the London Metal Exchange (LME) has come-off after making a high of $11,885 per tonne on Monday. It is currently trading at $11,585. Immediate resistance is at $11,770. As long as the contract trades below it, there is a strong likelihood of it falling towards $11,150 and $11,000 in the coming days. The level of $11,000 is a strong support and a break below it looks less probable. If the LME-Nickel contract breaks below this support, a fall to $10,700 is possible.

A strong rise past $12,000 is needed for the contract to gain fresh momentum. Such a break will then increase the likelihood of the contract targeting $12,350.

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

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