Go short on copper futures
After facing a sharp decline between March and mid-July this year, copper continuous futures on the Multi Commodity Exchange (MCX) have started to recover after hitting a low of ₹602.15. Simply put, the contract has been in recovery since last month and is currently trading at around ₹665.
Although the price has risen, the overall bias remains bearish and we expect the upside to be limited. The contract could reverse from ₹670 or ₹700 and resume the downward trend. In this case, the price might slide below the support at ₹600 and decline towards the support band of ₹530-550. A fall below is less likely.
On the other hand, if the contract manages to rally above ₹700, the trend might turn bullish as the price could reach ₹740.
That said, the resistance at ₹700 holds true as of now and the trend remains bearish. Therefore, one can consider executing new short positions. But it can be implemented in two steps as below.
Short copper futures when the price touches ₹670. Add more shorts if it rallies to ₹700 and place an initial stop-loss at ₹745. When the contract reverses lower, as expected, and drops below ₹600, revise the stop-loss to ₹670. Liquidate all shorts when the contract touches ₹550.
August 10, 2022