Copper prices have been stuck in a sideways range over the last few weeks. The copper futures contract on the Multi Commodity Exchange (MCX) has been range bound between ₹420 and ₹450 per kg since mid-November. Within this range, the contract is currently trading around ₹440 per kg.

Outlook

Though the contract has been trading in a sideways range for some time, the bias is positive. The price action on the chart indicates a formation of an inverted head and shoulder pattern on the daily chart. This is a bullish reversal pattern signalling that the downtrend could be coming to an end. The neckline resistance is poised around ₹450. This bullish reversal pattern on the chart increases the likelihood of the contract breaking the current range above ₹450 in the coming days. Such a break will confirm the pattern and will take the contract initially higher to ₹465.

A further break above ₹465 will then target ₹485 thereafter. Inability to breach ₹485 can trigger a pull-back move to ₹465 or ₹460. But a strong break and a decisive close above ₹485 will boost the momentum. It will also see strong and fresh buying interest coming into the market. In such a scenario, the possibility is high of the contract targeting ₹510 and ₹515 levels over the medium term.

The region between ₹420 and ₹418 is a crucial support for the MCX-Copper futures contract. A strong medium-term trend line support is also poised in this region. Only a break below ₹418 will turn the outlook negative. The next target is ₹400. However, such a strong break and a fall below ₹418 looks unlikely at the moment.

Trading Strategy

Traders with a medium-term perspective can go long at current levels and also accumulate on dips at ₹430 and ₹422. Stop-loss can be placed at ₹405 for the target of ₹510. Revise the stop-loss higher to ₹460 as soon as the contract moves up to ₹475.

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

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