The short-term outlook is bearish for the lead futures contract on the Multi Commodity Exchange (MCX). The contract spiked to a high of ₹196 per kg by the end of November and has been coming down since then. The price action since last week indicates that the contract is struggling to rise back above ₹187. It is currently trading at ₹185 per kg.
The level of ₹187 will continue to act as a strong resistance. The chances are less for the contract to rise past ₹187 immediately. As long as the contract stays below ₹187, there is a strong likelihood of falling to ₹182-180 in a week or two. A corrective bounce from around ₹180 to ₹183-₹185 cannot be ruled out. But eventually we expect MCX-Lead to break below ₹180 and extend the fall to ₹175 in the coming weeks.
The bearish outlook will get negated only if it breaks above the resistance at ₹187. Such a break can then take the contract up to ₹193 and ₹195 again.
Traders can go short now. Accumulate shorts on a rise at ₹186. Keep a stop-loss at ₹188. Trail the stop-loss down to ₹185 as soon as the contract moves down to ₹183.5. Move the stop-loss further lower to ₹182 when the contract touches ₹181 on the downside. Exit the shorts at ₹180.