Technical Analysis

MCX-Copper is range bound with a bullish bias

Gurumurthy K Updated on December 11, 2018

 

 

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

Read the rest of this article by Signing up for Portfolio.It's completely free!

What You'll Get





This article is closed for comments.
Please Email the Editor