Copper futures on the Multi Commodity Exchange (MCX) fell off the resistance at ₹820 last week. It dropped below the support at ₹800 and closed at ₹785.35 on Tuesday.
While the inclination appears bearish, the copper futures (September) has a support at ₹774. The bears are likely to drag the price below this level to establish another downtrend.
If the support at ₹774 is breached, the contract can decline to ₹740-750, a strong base. Subsequent support is at ₹720.
But if there is a recovery from the current level, the copper futures will again face a barrier at ₹820. Only a breakout beyond this can turn the outlook positive.
If the contract crosses ₹820, it can rise to ₹840 quickly. The rally may even extend to ₹875.
Trade strategy
Since there is support ahead, fresh short positions are not recommended even though the broader bias is bearish.
Traders with high risk appetite can consider going long at ₹780 with a tight stop-loss at ₹768. When the price touches ₹800, revise the stop-loss to ₹788. Exit at ₹820.
If the support at ₹774 is breached, the above stop-loss would be hit. Participants can then consider fresh short positions with initial stop-loss at ₹786.
When the price declines to ₹760, alter the stop-loss to ₹770. Book profits at ₹750.