Technical Analysis

MCX-Nickel: Downtrend nears a crucial support

Gurumurthy K BL Research Bureau | Updated on November 28, 2018 Published on November 28, 2018

The Nickel futures contract on the MCX extended its downmove as expected last week. The contract tumbled over 3 per cent from around ₹780 per kg and made a low ₹751.9 on Monday. But, it bounced slightly from the low and is currently trading at ₹761 per kg.

The downtrend that has been in place since June remains intact. The contract is likely to extend the current downmove in the coming days. However, a crucial support is poised near current levels at ₹735. This support level is likely to be tested in the near term. The presence of a trend-line as well as the 200-week moving average (WMA) at around this level makes it a crucial support for the contract. So, whether the contract manages to bounce from ₹735 or not will determine the direction of the next move. As such, the price action in the coming days needs a close watch.

If the MCX-Nickel futures contract manages to reverse higher from ₹735, an upmove to ₹795 is possible due to short-covering. A further break above ₹795 will then increase the likelihood of the relief rally extending to ₹820. On the other hand, if the contract declines decisively below ₹735, the downside pressure will increase. In such a scenario, the current downtrend is likely to extend towards ₹700 or even lower levels. Traders can stay out of the market at the moment.

On the global front, the outlook for the Nickel (three-month forward) contract on the LME is also negative. The LME-Nickel has been on a strong downtrend since June and it remains intact. The contract has declined below the psychological level of $11,000 per tonne in the past week. It is currently trading at $10,775 per tonne.

As long as it trades below $11,000, there is a strong likelihood of the contract extending its fall to $10,450. A further break below $10,450 will then increase the possibility of the contract tumbling towards $10,000.

(Note: The recommendations are based on technical analysis. There is a risk of loss in trading.)

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