Lead futures on the Multi Commodity Exchange (MCX) has been charting a sideways movement over the past month. The July contract fell off the resistance at ₹196 towards the end of May.
The chart shows that there has not been a definite trend of late, but the price action resembles a triangle pattern. If the contract slips below ₹188, it will confirm the pattern and the downtrend can extend.
In addition, ₹191 has been acting as a strong barrier, which the bears can capitalise on and trigger a fresh leg of fall. Overall, the probability of a decline appears high at the moment.
A downswing from here can drag the contract to ₹180, its nearest notable support. On the other hand, if lead futures break out of ₹191, it can rally to ₹196. A move above ₹196 is less likely as it is a strong resistance.
Trade strategy
Last week, we recommended going short on lead futures (July series) at ₹190. Place stop-loss at ₹192.50. Retain this trade. When the contract touches ₹187, modify the stop-loss to ₹190. Tighten the stop-loss further to ₹187 when the price hits ₹183. Liquidate the shorts at ₹180.