MCX-lead (₹123.3/kg):Buy

The lead futures contract traded on the Multi Commodity Exchange (MCX) advanced one per cent on Monday to ₹125/kg. Since bottoming out from the December 2008 low of ₹40, the metal has been on a long-term uptrend.

However, the contract encountered a key long-term resistance (October 2007 peak) at ₹155 in August 2014 and started to decline. With this up move one-leg of the contract's uptrend appears to have come to an end. The contract has been on broad sideways consolidation phase in the range between ₹121 and ₹140.

Short-term view: In early August, the contract encountered resistance at ₹140 which the upper boundary of the sideways consolidation phase and began to decline. The short-term trend has been down since then.

Nevertheless, the significant long-term support in the band between ₹120 and ₹121 halted the metal's decline in mid-October. Subsequently, the contract started to change direction triggered by positive divergence in the daily relative strength index as well as moving average convergence divergence indicator.

The daily RSI is moving higher in the neutral region towards the bullish zone. Further the daily MACD has signalled a buy.

As the contract is reversing higher from a significant support band with positive bias, we take a contrarian bullish stance on the contract in the short-term. The contract can extend its progressing up move in the coming week and reach the price target of ₹130 initially and then to ₹133. Traders with a short-term perspective can buy the contract and also accumulate in declines with a stop-loss at ₹120 levels.

Medium-term view: The medium-term outlook is sideways in the broad band between ₹121 and ₹140 for the MCX-lead futures contract. It is reversing from the lower boundary. A decisive rally above ₹130 can take the contract northwards to the upper boundary of ₹140 in the medium-term.

However, decisive close below the ₹120 will alter the sideways trend into bearish and pull the contract down to ₹115. In that scenario, investors should exit the long positions and stay on sidelines.