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The bulls were stopped by the resistance at ₹1,235 and so the rally in the December futures contract of nickel on the Multi Commodity Exchange (MCX) stalled last week. Consequently, the price softened to ₹1,200 – considerable support level – from where it rebounded and it is currently retesting the resistance at ₹1,235. The 21-day moving average (DMA) coincided at this level back then, acting as a strong base. Thus, the near term trend has not reversed and the bias is still bullish.
However, if it does not breakout of ₹1,235 and continues to consolidate, the likelihood of a bearish reversal will increase. If this occurs and as a result the contract breaches the support at ₹1,200, the short-term trend can turn negative and the price is likely to drop further to ₹1,173 – its 50 DMA. But if the contract manages to gather upward momentum and crosses over the hurdle at ₹1,235, it can advance to 1,268. Above this level, there is a resistance band between ₹1,290 and ₹1,300.
Since there has been a price correction of late, the relative strength index and the moving average convergence divergence indicators on the daily chart have turned flat, indicating that the rally has lost steam. Considering the above factors, traders can stay in the sidelines for now and initiate fresh long position if the contract breaks out of the resistance at ₹1,235. Stop-loss can be placed at ₹1,200.
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