Gurumurthy K The Lead futures contract on the Multi Commodity Exchange of India was volatile in the past week. The contract surged to make a high of ₹144.15 per kg on December 28 and has come off sharply from there giving back all the gains made during the week. It is currently trading at ₹138 per kg.
The contract has been oscillating between the 200- and 21-week moving averages over a month. It has been stuck inside sideways range between ₹135 and ₹145 over the last few weeks. A breakout on either side of ₹135 or ₹145 will determine the direction of the next move. Traders can stay out of the market until the range breakout gives a clear trade signal.
If the contract breaks below ₹135, it can fall initially to ₹133. A bounce from ₹133 can trigger a corrective rally to ₹137 or ₹138. But a strong break below ₹133 will increase the downside pressure and will take the contract lower to ₹130. A further break below ₹130 will then increase the likelihood of the downmove extending to ₹125 or even lower over the medium term.
On the other hand, if the MCX-Lead futures contract sustains above ₹135, an upmove to ₹143 and ₹145 can be seen in the coming days. A strong break and a decisive close above ₹145 is needed to turn the outlook positive. Such a break will pave way for the next target of ₹150.
Global trend
The Lead (three-month forward) contract on the LME broke the key resistance level of $2,020 per tonne in the past week but failed to sustain higher. The contract has come-off sharply after making a high of $2,062 on December 28. It is currently trading at $1,955 per tonne.
The key support region of $1,900-$1,890 is likely to be tested in the near term. A bounce from there can take the contract higher to $1,970. But a strong break below $1,890 will increase the selling pressure and will drag the contract lower to $1,800 in the coming weeks.
(Note: The recommendations are based on technical analysis and there is a risk of loss in trading.)
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