The nickel futures contract on the Multi Commodity Exchange (MCX) has been inching higher over the last couple of weeks.
The contract made a low of ₹907.3 per kg on July 19 andhad reversed higher from there. It is currently trading at ₹951.
But the price action on the chart indicates that this bounce-back from ₹907 lacks strength. A key resistance is poised in the ₹955-960 zone.
Whether the contract breaks above ₹960 or not will decide the next move.
A strong break above ₹960 will ease the downside pressure.
Such a break will take the contract higher to ₹990 or ₹1,000 on the back of short-covering. On the other hand, if the contract reverses lower in the coming days after testing the ₹955-₹960 resistance zone, it can fall to ₹910.
In such a scenario, the overall downtrend that has been in place since June will remain intact. A break below ₹910 will then increase likelihood of the contract extending its down-move to ₹885.
The region around ₹885 is a crucial long-term support. A bounce from this support may have the potential to take the contract higher to ₹950 levels again.
But a strong break below ₹885 will drag it lower to ₹860 or ₹850.
Trading strategy
Traders who have taken short positions at ₹935 and ₹950 can hold it. Retain the stop-loss at ₹965 for the target of ₹875.
Revise the stop-loss lower to ₹925 as soon as the contract moves down to ₹915.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.