Copper prices witnessed a sharp fall last week, breaking below their key support in line with our expectation. The copper futures contract traded on the Multi Commodity Exchange (MCX) broke the support at ₹712 per kg and fell towards ₹700 as expected. The contract made a low of ₹699.50 and has recovered well from there. It made a high of ₹713.60 and has since declined from that level. The MCX Copper futures contract currently trades at ₹705 per kg.
Outlook
The trend is down. Strong resistance is seen between ₹713 and ₹718. This resistance zone is holding well for now. As long as the contract trades below ₹718, the outlook will remain bearish. The MCX copper futures contract can fall to ₹685 over the next two-three weeks.
The region around ₹685 is a strong support. So, the chances for a fall to halt around that support are high. A fresh bounce from around ₹685 will have the potential to take the copper contract up to ₹700 and higher again.
To avoid the above-mentioned fall to ₹685, a strong and sustained rise above ₹718 is needed. Such a rise can take the contract up to ₹730. But as seen from the chart, a rise above ₹718 is unlikely at the moment.
Trade strategy
Positional trades with a time frame of two-three weeks can be considered at the moment. Go short now at around ₹705. Accumulate on a rise to ₹711. Keep a stop-loss at ₹719. Trail the stop-loss down to ₹701 as soon as the contract falls to ₹697. Move the stop-loss further lower to ₹696 when the price touches ₹692. Exit the short positions at ₹688.
