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Lead futures (June expiry) on the Multi Commodity Exchange (MCX) was charting a sideways trend over the past two weeks. It was oscillating between ₹186 and ₹192. As this contract is nearing expiry, we shall consider the July contract for analysis.
The July contract has largely been kept within ₹187 and ₹190. The 20-day moving average coincides at ₹190, making it a strong resistance. Nevertheless, the next leg of trend depends on the direction of the break of this region.
A breach of the support at ₹187 can open the door for a fall to ₹180 and possibly to ₹174. On the other hand, if lead futures break out of ₹190, it can extend the upswing to ₹196, a long-term barrier. Most likely, the rally will be halted at this level.
That said, a breach of ₹196 can result in lead futures establishing a new leg of medium-term uptrend. However, given the current conditions, the bias is bearish.
Trade strategy
We recommended short on lead futures (June) last week. Exit this trade at the current level of ₹191. Then wait for the July contract to move out of the ₹187-190 range before initiating fresh trade.
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