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Post a sharp correction in February last year, the price of nickel recovered and as a result of which the continuous futures contract of the metal on the Multi Commodity Exchange (MCX) rallied. It marked a fresh high of ₹1,641.6 towards the end of October. However, since then, the contract was largely trendless and to be specific it has been charting a triangle pattern.
On Tuesday, the contract moved out of the pattern on the upside and this is a strong indication of continuation in the uptrend. Bullish inclination is corroborated by indicators like the relative strength index (RSI) and the average directional index (ADX) – both are showing fresh uptick. The price is above both 21- and 50-day moving averages (DMAs). Moreover, the total number of outstanding open interest of all active nickel futures on the MCX has been increasing over the past month along with price rise, a bullish sign. On Tuesday it stood at 3,808 contracts compared to 2,257 contracts about a month back. So, these factors are hinting at a fresh leg of uptrend.
From the current levels, the nearest resistances are at ₹1,668 and ₹1,700. Supports from the current levels are at ₹1,600 and ₹1,570.
Hence, traders can consider going long at current level of ₹1,618 and accumulate more if price dips to ₹1,600. Place initial stop-loss at ₹1,570. When the contract touches ₹1,668, liquidate half of the longs and then revise the stop-loss to ₹1,620. Exit the remaining longs at ₹1,695.
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