Copper futures on the Multi Commodity Exchange (MCX), which has been in an uptrend since early September, was consolidating in a price band over the past few sessions.
But on Tuesday, it slipped below a support at ₹850. The price action denotes considerable selling pressure and so, the chance for further drop is high.
From the current level, copper futures is likely to drop to ₹825. However, the broader uptrend will be valid so long as the price remains above ₹825.
Going ahead, copper futures can decline to ₹825, rebound from this support and then rise again to ₹865.
On the other hand, if the contract breaks the support at ₹825, the near-term outlook can turn bearish. Support levels below ₹825 are at ₹810 and ₹790.
Trade strategy
Although the probability of the downswing extending is high, the risk-reward ratio is unfavourable for fresh short positions.
Also, copper futures has a support at ₹825, which can help the bulls to regain traction.
Therefore, traders can stay out now and go long when the price dips to ₹825. Stop-loss can be at ₹805.
When the price rises to ₹850 after the trade is initiated, revise the stop-loss to ₹835. Book profits at ₹865.