Technical Analysis

Near-term outlook is negative for MCX-Lead

Gurumurthy K BL Research Bureau | Updated on March 07, 2019 Published on March 07, 2019

The Lead futures contract on the MCX has reversed lower in the past week. The contract made a high of ₹154.1 per kg on February 28 and has come-off sharply from there. The contract has tumbled over 4 per cent from the high and is currently trading at ₹147.5 per kg.

Technically, the trendline resistance at around ₹153 has halted the upmove and has triggered a reversal. Though there is support near current levels at ₹147, the bias is negative. There is a strong likelihood of the contract extending its current downmove to ₹144 or ₹143 in the coming days. Whether the contract bounces from this support zone or not will decide the direction of the next move.

An upward reversal from the ₹144-143 support zone can take the contract higher to ₹147 again. A further break above ₹147 will then increase the likelihood of the contract revisiting ₹150 and ₹152 levels.

On the other hand, if the MCX-Lead futures contract breaks decisively below ₹143, it can come under renewed pressure. Such a break will then increase the possibility of the contract falling to ₹140 and ₹139.

Trading strategy

High-risk appetite traders who have taken long positions at ₹152, ₹150 and ₹149 should remain cautious. Retain the stop-loss at ₹146 for the target of ₹160. Revise the stop-loss higher to ₹154 as soon as the contract moves up to ₹156.

Global trend

The Lead (three-month forward) contract on the London Metal Exchange (LME) has come-off after making a high of $2,179.5 per tonne on February 28. It is currently trading at $2,099 per tonne. Immediate resistance is in the band between $2,120 and $2,140. As long as the contract trades below this hurdle, a fall to $2,045 and $2,040 is likely in the near-term.

The level of $2,040 is a key support. A bounce from there can take the contract higher to $2,100 and $2,200 again.

 

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