Copper prices have been under pressure over the last few weeks. The copper futures contract on the Multi Commodity Exchange (MCX) made a multi-year high of ₹493.25 per kg in the first week of June and has come off sharply from there.
The contract has tumbled about 10 per cent from this high and made a low of ₹445.45 per kg last Friday. The contract has, however, managed to bounce back from this low and is currently at ₹450 per kg.
Outlook
The contract has been range bound between ₹445 and ₹455 over the last one week. A crucial long-term support poised in the ₹440-₹445 region has halted a sharp fall in the contract.
The slowdown in the pace of the fall and a subsequent sideways consolidation is technically significant. These indicate that the ₹445-₹440 support region is holding well and the contract lacks strong sellers to drag it decisively below this support zone. As long as the contract sustains above ₹440, there is a strong likelihood of witnessing a strong and a fresh uptrend in the coming weeks. Immediate resistance is at ₹455.
A strong break above it can take the contract higher to ₹465 on the back of short-covering. A further break above ₹460 will then trigger a fresh rally targeting ₹480 and ₹490 levels over the medium term.
The outlook for the contract will turn negative only if it breaks below ₹440 decisively. Such a break can then drag the MCX-Copper futures contract lower to ₹425 or ₹420.
Trading strategy
Traders with a medium-term perspective can go long at current levels and also accumulate on dips at ₹445.
A stop-loss can be placed at ₹432 for the target of ₹485. Revise the stop-loss higher to ₹458 as soon as the contract moves up to ₹465.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading