Lead futures on the Multi Commodity Exchange (MCX) have been hovering around a substantial resistance in the ₹194-196 price band. While there has not been a bearish reversal yet, the bulls, too, have not been successful in pushing the contract above the resistance. It is now trading around ₹195.
Notably, the long-term chart of continuous contract of lead futures shows that it has fallen off the ₹194-196 price band several times since September 2021. So, a prolonged consolidation around these levels will only increase the probability of a decline.
If such a downward move happens, lead futures can depreciate to ₹180, a good support. Below this level, ₹174 is an important base. On the contrary, if the contract breaches ₹196, the momentum of such a breakout can lift the contract to ₹208 swiftly.
However, as things stand, the resistance band of ₹194-196 holds true. This makes the risk-reward ratio favourable for short positions, though the recent trend has been bullish.
Trade Strategy
Short lead futures are now at ₹195 with a stop-loss at ₹198. When the contract slips below ₹188, bring the stop-loss down to ₹194. Revise the stop-loss further lower to ₹188 when lead futures touch ₹184. Book profits at ₹180.