The July futures contract of nickel on the Multi Commodity Exchange (MCX) has been on a decline since last week after making a high of ₹997.8. Currently trading at ₹969, it is testing the 21-DMA and the price action on the daily chart hint at the possibility of contract entering a consolidation phase between ₹955 and ₹1,000.

Confirming the weakness in the upward momentum, the daily RSI, though above the midpoint level of 50, has been declining since past week. If it goes below the midpoint, it could mean that the bears are beginning to have an upper hand. Moreover, the MACD indicator on the daily chart has turned its trajectory downwards. Nevertheless, the contract is above the support level of ₹955. The 23.6 per cent Fibonacci retracement level is making it a strong support.

If the bulls give up and the price breaks below ₹955, it could result in a considerable decline where the contract could fall to ₹930 — the 38.2 per cent Fibonacci retracement level. Below that level, it could even drop to ₹900. But if the contract takes support at ₹955 and rallies, it is likely to test the critical resistance at ₹1,000. A breakout of that level can take the contract to ₹1,025.

On the global front, the price of three-month rolling forward contract of nickel on the LME has come down after facing resistance at $13,000. It is currently trading near the support of $12,575. A break below this level can result in a sharp decline.

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Trading strategy

The metal seems to be exhibiting weakness as the contracts on the MCX and LME has softened after testing the respective previous highs. Also, there are bearish indications. However, MCX-Nickel has a support at ₹955. So, traders can sell the contract with stop-loss at ₹980 if it breaches the support at ₹955.

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