Lack of progress between China and the US continues to dominate market focus with a fresh round of tariffs between the two set to take effect next week.
Priyank Upadhyay
SSJ Finance & Securities
Concerns over the ongoing US-China trade war continue to dampen investors’ appetite for base metals and consequently pressure prices lower.
Despite the optimism in the market over a trade agreement reached between the US and Mexico earlier this week and positive developments in negotiations over the North American Free Trade Agreement.
Lack of progress between China and the US continues to dominate market focus with a fresh round of tariffs between the two set to take effect next week.
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Lead prices have retraced from the recent lows thanks to a bullish backdrop of low on-exchange stocks and tightened supply of lead ore and concentrate globally.
SHFE lead stocks totaled 18,277 tonnes on August 24, down 56.3 percent from 41,816 tonnes at the start of the year. Stocks at London Metal Exchange warehouses totaled 126,225 tonnes on Wednesday, which is down by 11.2 percent from 142,225 tonnes on January 2 – the first trading day of 2018.
This comes at the time when global mine output fell by 98,000 tonnes or 4.2 percent in the first half of 2018 according to the latest International Lead and Zinc Study Group data.
This is another indication that the global lead concentrate market has tightened and likely to remain so until year end.
MCX Lead Technical Analysis:
From the above daily chart of ‘Lead’ we can see that prices after making highs around 170 in the month of June have seen a sharp decline below 140 and have recently given a pullback towards 147/150 zones after making a low around 137.50.
When prices started a correction from 170 in the month of June at that time major supports was seen around 150 (Blue Horizontal Line) and prices broke below that level and went below 140.
Going forward, we have seen a retracement from the oversold zones of 140 and now prices are trading around 148 zones. Prices could face stiff resistance again towards the horizontal line which was earlier a support line now turned as a resistance line at 150/152.
We could see prices heading lower again towards the previous swing low of 137 in near term. Prices are also nearing the 50-day SMA at 150.3 (Orange Line) which could offer resistance and they converge with the horizontal blue line.
It could be difficult for prices to break above 152 in the first attempt and we could see a down move towards 143/140 zones or may retest the recent low around 137.
The relative strength index (RSI) is also approaching the overbought zones at 60, which could also provide resistance to prices in the near-term.
Thus from the above analysis, we conclude that as long as we are below Rs 152 on a daily closing basis we expect a move lower towards Rs 144/140 zones and a possible test of Rs 137 again.
Disclaimer: The author is AVP Commodity Research, SSJ Finance & Securities Pvt Ltd. The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.