Nickel Futures: Bulls sneaking
After a sharp correction in February last year, nickel prices improved and resulted in a rally in the metal’s continuous futures contract on the Multi Commodity Exchange (MCX). It hit a new high of ₹ 1,641.6 in late October. Since then, however, the contract has been largely trendless and, to be precise, charting a triangle pattern.
On Tuesday, the contract moved out of the above pattern and this is a strong indication that the uptrend will continue. The bullish trend is supported by indicators such as the Relative Strength Index (RSI) and the Average Directional Index (ADX) – both showing new uptrend. The price is above both the 21- and 50-day moving averages (DMA). In addition, the total number of outstanding open interest of all active nickel futures on MCX has been increasing with the price increase in the last one month, which is a sign of recovery. On Tuesday it was at 3,808 contracts compared to 2,257 contracts about a month ago. Therefore, these factors indicate a new phase of uptrend.
From current levels, the nearest resistance is at ₹ 1,668 and ₹ 1,700. Support from current levels is at ₹ 1,600 and ₹ 1,570.
As such, traders may consider a long-term move to the current level of ₹ 1,618 and may accumulate more if the price falls to ₹ 1,600. Put the initial stop-loss at 1,570. When the contract touches ₹ 1,668, liquidate half of the longs and then correct the stop-loss to ₹ 1,620. Exit at ₹ 1,695 from the remaining Longs.