The price of lead had been consolidating for quite a long time. Consequently, the continuous contract of lead on the MCX (Multi Commodity Exchange) was oscillating between ₹180 and ₹195 from September 2021 to June this year.
Nevertheless, towards the end of June, it broke below the support at ₹180. Last week, it closed at ₹175 and, technically, this can be taken as a confirmation for a bearish reversal, at least as a short-term view.
From the current level of ₹175, the nearest support can be found at ₹166. Subsequent support is at ₹158. At ₹158 lies the 50 per cent Fibonacci retracement level of the rally between the March 2020 low of ₹118.85 and the high of ₹198 in early March 2022. This makes ₹158 a significant support, and a decline below this is less likely.
But there is a possibility for the contract to retest the support-turned-resistance level of ₹180 before falling below ₹170.
Therefore, traders can consider initiating fresh short positions at the current level of ₹175 and short more when the contract sees a rally to ₹180. Place stop-loss at ₹184.
When the contract drops to ₹166, exit three-fourth of the shorts and tighten the stop-loss to ₹172. Exit the remaining short when price touches ₹158.