Copper futures on the Multi Commodity Exchange (MCX), which bounced off the support at ₹720 in the last week of July, broke out of the resistance at ₹745 last week.
But there was no follow through rally post breakout. The contract made a high of ₹757.75 last Tuesday and saw a decline. It closed at ₹740.15 last week.
The August futures of copper is currently trading at around ₹738 as the support at ₹734 has been preventing any decline below this level. Until this support holds, there is a good chance for the contract to resume the rally.
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If there is a rally from here, the copper futures can retest ₹757. A break out of the prior peak can lift the contract to ₹785. The price band of ₹785-800 is a resistance.
On the other hand, if the contract falls below ₹734, it will confirm a head and shoulder pattern on the hourly chart. According to this pattern, the price of copper futures could drop to ₹712. However, as it stands, the pattern is not confirmed and bulls are having an edge over the bears because of the support at ₹734.
Trade strategy
Buy copper futures now at around ₹738 with a stop-loss at ₹730. Liquidate the longs at ₹756.