For a little over two weeks, the copper futures on the MCX (Multi Commodity Exchange) has been on a corrective rally. The contract went up from about ₹600 to the current level of ₹645. Prior to that, it saw a leg of sharp downtrend where the price dropped from about ₹800 to ₹600, losing about 25 per cent.
While the overall trend remains bearish, there are chances for copper futures to inch up to ₹670 or even ₹700 before resuming the next leg of downtrend.
A rally beyond ₹700 is not likely as it is a strong resistance, as the broader trend stays bearish. Once the contract resumes downtrend, it can slip below ₹600 and decline to the support band of ₹530-550. This is a good base from which the contract can see a bounce.
Traders can consider executing fresh short positions when the contract moves up to ₹670. Add more shorts if it rallies further to ₹700 and place an initial stop-loss at ₹745. When the contract reverses to the downside and dips below ₹600, revise the stop-loss down to ₹670. Liquidate all the shorts when the contract touches ₹550. It could rebound anywhere within the price region of ₹530-550.