Lead futures (June contract) on the Multi Commodity Exchange (MCX) was gradually moving up in the first half of June. But after facing the resistance at ₹185, the contract made a U-turn and is now trading at around ₹180. Since the current series is nearing the expiry, for the purpose of analysis and trade recommendation, we will be considering the July series in this article.
The July series is now trading at ₹181.40, at a premium to the June expiry. However, the contract closed below a support at ₹183 on Monday, opening the doors for further depreciation. Although ₹180 is a support, the notable base is at ₹175. So, the July lead futures is likely to drop to ₹175 in the near-term.
Even if contract goes up, it is likely to be capped between ₹183 and ₹184. Only a decisive break out of the resistance at ₹186 can turn the trend bullish. Until then, bears will have an upper hand.
Trade strategy
Trailing stop-loss (₹180) of the short position in June futures that we recommended at ₹183.25 was hit on Tuesday. Since there are chances for further decline in prices, traders can consider fresh shorts now.
Sell July lead futures now at around ₹181.40 and add more shorts if the price moves up to ₹183. Place stop-loss at ₹186. When the contract sees a daily close below ₹180, tighten the stop-loss to ₹182. Further, when the contract touches ₹178, tighten the stop-loss to ₹180. Book profits at ₹176.