The Lead futures contract on the Multi Commodity Exchange of India fell sharply in the past week to make an intra-week low of ₹136.15 per kg on Tuesday. But the contract has bounced slightly from this low and is currently trading at ₹138 per kg.
Though the contract can move further higher to test ₹140 and ₹141 levels, the outlook is bearish. The indicators on the charts are also negative. The 21-day moving average has crossed below the 55-day moving average and is on the verge of crossing below the 100-day moving average. This is a negative sign indicating that the upside could be limited. As such, a rally breaking above ₹141 looks unlikely at the moment. A pull-back from the ₹140-141 resistance region can drag the contract lower to ₹136 again. A break below ₹136 can take it lower to ₹133 or even ₹130.
Trading strategy
Traders can go short at ₹140 and ₹141. Stop-loss can be placed at ₹143 for a target of ₹134. Revise the stop-loss lower to ₹137 as soon as the contract moves down to ₹135.
Global trend
The Lead (three-month forward) contract on the London Metal Exchange is on a strong downtrend since the beginning of this month. The contract fell 1.5 per cent in the past week and is currently trading at $2,008 per tonne.
The outlook is negative. A key resistance is at $2,035 which can cap the upside. A fall to $1,950 or even $1,925 looks likely in the coming weeks.
The downside pressure will ease only if the LME-Lead contract breaks above $2,035 decisively. Such a break can take the contract higher to $2,070. A further break above $2,070, though unlikely will pave way for the next targets of $2,100 and $2,130.