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Copper prices have declined, breaking below support, contrary to our expectations for a bounce. Last week we said the copper futures contract on the Multi Commodity Exchange (MCX) could bounce back from the support at ₹734 per kg. But the contract has declined below this support. It made a low of ₹721.25 and is currently trading at ₹726 per kg
Outlook
The near-term view is negative. Strong resistance is seen in the ₹733-736 region. A cluster of moving averages are poised in this region, which makes it a strong resistance zone. As such, an immediate rise above ₹736 looks less likely for now.
The copper futures contract can fall to ₹713-712 in the next few days. The price action, thereafter, will need close watch. Failure to bounce back from the ₹713-712 support zone will be bearish. In that case, the contract can fall to ₹700 and even ₹690.
If the copper contract manages to bounce back from around ₹712, it can rise to ₹730-735.
Trade strategy
Traders can go short for now. Accumulate shorts on a rise to ₹732. Keep the stop-loss at ₹736. Trail the stop-loss down to ₹724 as soon as the contract falls to ₹721. Move the stop-loss further down to ₹719, when the contract touches ₹717 on the downside. Exit the short positions at ₹714.
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