The MCX-Nickel futures contract on the Multi Commodity Exchange (MCX) fell in the past week as expected. The contract made a high of ₹955 per kg on Thursday and reversed sharply lower. It had tumbled 4.7 per cent from this high to make a low of ₹910 on Tuesday. The contract has however bounced from this low recovering some of the loss and is currently trading at ₹933 per kg.

Pressure eases

The recent bounce-back move from ₹910 is technically significant. The upward reversal has happened from a key ₹910-₹900 support zone, which eases the downside pressure. It also gives an early sign that the downtrend that has been in place since April could have come to an end.

The contract will come under pressure again only if it breaks below ₹900 decisively. Such a break will increase the likelihood of the contract falling to ₹850 in the short term.

Having said that, as long as the contract remains above the ₹910-₹900 support zone, the outlook will remain positive. A rally to test the resistance in the ₹955-₹960 zone is likely in the coming days. Inability to break above ₹960 can trigger a pull-back move again. In such a scenario, the MCX-Nickel futures contract can trade in a sideways range between ₹900 and ₹960 for some time.

The contract will gain fresh momentum if it breaks above ₹960 decisively. Such a break will increase the possibility of the contract revisiting ₹985 and ₹1,000 levels over the medium term.

Trading strategy

Traders with a high-risk appetite can go long on dips at ₹925 and at ₹915. Stop-loss can be placed at ₹895 for the target of ₹985. Revise the stop-loss higher to ₹935 as soon as the contract moves up to ₹945.

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

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