The continuous futures of lead on the MCX (Multi Commodity Exchange), which hit a fresh one-year low of ₹166 a couple of weeks back, recovered and has rallied to the current level of ₹179.
The chart indicates that the upside is limited as the contract faces strong barriers at ₹180 and at ₹186. A falling trendline is projected to coincide at₹186, making it a significant resistance.
Therefore, going ahead, the lead futures is expected to resume the downtrend at ₹180 or ₹186. Either way, the overall bearish bias is expected to stay and therefore, participants can plan fresh trades accordingly. On the downside, the contract might fall to ₹150 before the end of this year.
A couple of weeks ago, we had recommended traders to stay out as there was a lack of clarity. Now that the contract is trading near a resistance level, one can consider initiating fresh positions now.
Short lead futures on the MCX at the current level and add more shorts when the contract rallies to ₹186. Place stop-loss at ₹192. If the contract moves according to our expectation and falls below ₹170, modify the stop-loss to ₹182.
Revise the stop-loss further down to ₹170 when the price declines to ₹160. Exit all your shorts at ₹150 because this is important support against which the contract can witness a rebound.
July 25, 2022