Technical Analysis

MCX-Lead stuck in a sideways range

Gurumurthy K BL Research Bureau | Updated on January 03, 2019 Published on January 03, 2019

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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