Copper futures on the Multi Commodity Exchange (MCX) has been appreciating sharply since February. The continuous contract made a low of ₹700 on February 12 before beginning the rally. It ended at ₹936.5 on May 20, gaining nearly 34 per cent from its low.
The contract is trading in uncharted territory, and there are no historical resistance levels at this price level. Also, there are no signs of a bearish reversal at the moment, so the likelihood of a rally is high.
The Fibonacci extension denotes that ₹936, ₹960, and ₹970 are the potential barriers. Subsequently, ₹1,000 can be the resistance.
On the other hand, if the copper futures price drop, it can find support at ₹920. Subsequent support is at ₹900.
Nevertheless, given the prevailing price action, the trend is bullish, any price correction is expected to be limited. Such minor moderation in price can be buying opportunities.
Trade strategy
Although the trend is bullish, we cannot reject the possibility of a possible correction, particularly because the Fibonacci extension hints that ₹936 is a potential resistance level.
So, traders can wait for now and buy copper futures if the price dips to ₹920. Place stop-loss at ₹900. When the contract rises past ₹940, trail the stop-loss to ₹925. Raise the stop-loss further to ₹940 when the price touches ₹950. Book profits at ₹960.
If copper futures breakout of ₹940 from the current level, without a correction price, go long with stop-loss at ₹925. Follow the stop-loss modifications as mentioned above.