The continuous futures of lead on the Multi Commodity Exchange (MCX), which bounced off the support at ₹166 nearly a month ago, has been rallying since then. While there was a pause at around 180, the contract managed to appreciate to the current level of 182. Early this week it made a high of 185.65.
Note that 184 is a resistance. A falling trendline coincides at this level, making the resistance stronger. Therefore, we expect the contract to make a U-turn and decline from the current level. It can fall below 180 and touch 175 in the near term. A breach of this level can potentially drag the contract to 157.
Last week, we had recommended initiating shorts positions at around 175 and suggested shorting more at 184. Those who executed these trades would now have shorts with average entry price at around 180 with a stop-loss at 192.
Fresh short positions can also be initiated at the current level with stop-loss at 192.
When the contract moves according to our expectation and falls below ₹166, modify the stop-loss to ₹182. Exit all your shorts at ₹157 because this is a key support against which the contract might witness a rebound.
But it is important to note that if the contract rallies above ₹184, it can turn the trend bullish. A move above ₹184 could also mean that the falling trendline resistance would have been nullified, making the case stronger for the bulls. Above ₹184, the resistances are at ₹195 and ₹200.