The lead futures contract on the Multi Commodity Exchange (MCX) which was inching higher in the past week has witnessed a sudden downward reversal today. The contract made a high of ₹157.3 per kg on Wednesday and has come-off sharply from there. It is currently trading at ₹153.5 per kg.
Outlook is bearish
Key resistance for the contract is at ₹158. Only a strong break above this level will ease the downside pressure and take the contract higher to ₹160 or even higher levels.
But the bias on the chart remains bearish. As mentioned last week, the price action since March indicates the formation of a wedge pattern – a continuation pattern that suggests that the downtrend is likely to resume. A strong close below ₹154 will be the first confirmation sign of this pattern breakout. Further break below ₹153 – the 55-week moving average support, will see the downtrend resuming towards ₹150 or ₹149 in the coming days.
The region between ₹149 and ₹148 is a key long-term support zone. So, the price action at this support zone will need a close watch. A strong upward reversal from this ₹149-₹148 support zone may signal the beginning of a fresh leg of a long-term upmove.
Trading strategy
Medium-term traders who have taken short positions last week at ₹155 and ₹157 can hold it. Retain the stop-loss at ₹159 for the target of ₹150. Revise the stop-loss lower to ₹153 as soon as the contract declines to ₹152.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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