Lead soars as pressures ease

 

A sharp and continuous rally in lead prices, for the past three weeks, has wiped out the losses the metal made in the first two weeks of January. The spot price on the London Metal Exchange (LME) has surged 10 per cent from $1,600 to $1,771 per tonne.

On the domestic front, the lead futures contract traded on the Multi Commodity Exchange (MCX), which moves in tandem with the LME spot price, also rose 10 per cent over the same three-week period and closed on a stronger note at ₹120 per kg last week.

Two major factors have triggered the recent rally in lead. First is the recent weakness in the dollar which, in turn, has added sheen to assets like commodities and non-dollar currencies, in the last few weeks.

Two, recent data releases showing an increase in lead imports by China have also supported price rise for the metal. The country’s lead imports have increased about 45 per cent to 297 tonnes in December from the previous month according to data from Bloomberg.

Reports also suggest that an increase in the demand for batteries due to more battery failures this winter season has also helped prop up lead prices. Though the recent rally in lead can also be attributed to short-covering, the charts suggest that the recent uptrend can possibly extend.

Medium-term view

Barring the brief fall below $1,600 to hit a six-year low of $1,554 in late November, LME spot lead has been range-bound between $1,600 and $1,800. The metal’s price rose to a high of $1,818 on Thursday last week, but fell back to close below $1,800 — the upper end of the range at $1,771. Price action in the coming weeks will need a close watch as it would decide whether the metal will stay in the $1,600-1,800 range or break above $1,800 to rise further.

A strong break and a decisive weekly close above $1,800 can increase bullish momentum and take it higher to $1,850 immediately. A further move above $1,850 can see the rally extending towards the next target of $1,900.

The lack of follow-through selling below $1,600 is a positive. Also, the metal has been moving inside a channel since October 2012. Since August 2015, this channel support in between $1,650 and $1,600 has been consistently limiting the downside and is providing a strong support. This is why a decisive weekly close above $1,800 will not just boost the bullish momentum, but also signal that the channel is intact. This increases the possibility of the LME spot testing $2,000 in the coming months.

On the domestic front, the recent rally in the MCX-lead futures contract is signalling a break-out of the range-bound movement that has been in place for more than six months since June 2015.

The contract is hovering near the 200 and 100-week moving averages, which are poised between ₹120 and ₹121. A strong rise above ₹121 can take the contract higher to test the next important resistance at ₹130 in the coming weeks. A further break above ₹130 can take the contract higher to ₹140. The contract has formed a strong base in between ₹110 and ₹105. The outlook will turn bearish only on a strong fall below ₹105. Such a fall will increase the danger of the contract falling to ₹100 and ₹98 thereafter.

Short-term view

The short-term trend for lead is higher. The MCX lead futures contract has broken above an important resistance at ₹117. Immediate support is at ₹119 and then a significant support is at ₹117. As long as it stays above these supports, there is no immediate danger of a sharp fall in the contract.

Intermediate dips to these supports may see new buyers coming into the market. At the moment, the downside is expected to be limited to ₹117.

A rise to test the next resistance at ₹127 looks likely in the coming days. The outlook will turn negative for a fall to ₹115 and ₹112 only if the contract declines below ₹117.

If the contract manages to surpass the immediate hurdle at ₹127, it can rise further to ₹130.

Increase in Chinese imports and a weak dollar have helped the metal reverse

LME Lead prices may drop to $1,670-1,680 a ton range next week

 LME lead should weaken towards $1,670-1,680 a ton next week, SMM lead group foresees.

Base metals should continue to be depressed by China’s negative indicators and stronger dollar next week, boding ill for lead prices.

Longs for LME lead exit market, driving positions down. Technical indicators also show signs of falling.

SHFE 1510 lead may slip to RMB 12,800 a ton next week with strong resistance forming at RMB 13,000 a ton.

China spot lead is expected to range between RMB 13,100-13,300 a ton next week. Trades should pick up early August. 

More lead smelters will resume operation but operating rate at motive battery makers will also increase due to battery price hikes.

El Nino to Boost Lead Prices in Q3

The El Nino phenomenon will cut refined lead and lead concentrate supply, proffering impetus to lead prices in Q3.

China’s National Climate Center says the impact of the El Nino phenomenon will continue into autumn this year, bringing floods to south China and droughts to north China and some areas of northwest China.

China’s lead concentrate output has been falling this year due to environmental protection efforts and thin profits, and is set for sharper declines due to extreme weather conditions.

“Some major lead concentrate and refine lead producing regions will be affected by the abnormal weather, leading to production cuts, and in turn price hikes.”

Mines in Yunnan, Hunan, Guangxi and Sichuan may curtail production due to strong storms, while dressing operations in Inner Mongolia will be hindered by drought conditions in summer. Data from the National Bureau of Statistics indicate combined lead concentrate output from the five regions mentioned above makes up 68.67% of the national total.

Moreover, smelters in Henan, Inner Mongolia and Shandong which claims about 40% of China’s lead production will witness output declines due to high temperatures. Meanwhile, lead-acid battery market will enter peak season in summer months. The factors will combine to boost China’s lead prices.

“Worldwide, the El Nino will affect lead concentrate output of major producers, such as Australia, US, Peru and India, and the falling supply will garner considerable attention, particularly among speculators,” SMM research team added. Lead concentrate output from these four countries accounts for about 57.28% of the world’s total (excluding China output), according to the International Lead and Zinc Study Group.

What are the factors to weigh Lead prices?

Lead prices will be weighed on with bullish mood receding and secondary lead supply on the rise, Shanghai Metals Market believes.

As per the latest SMM Survey, only one out of ten lead industrialist remained bullish toward lead prices, and six of them expected prices to fall after treading water in the past week. The remaining three considered it hard to judge the price trends.

The strengthening bearishness is expected to pressure prices.

On top of that, many secondary lead smelters have resumed production, and those unlicensed ones were willing to cut prices for sales, also boding ill for lead prices.

This occurred at the same time when E-bike battery sector entered an off-season, which is curtailing lead demand. Resultantly, secondary lead supply remains ample even after a few producers were ordered to close again for environmental issues.

SMM data indicate a fall in secondary lead quotes to only 11,650-11,750 yuan per tonne in Shandong and Anhui May 14. Price offers in Guangdong and Fujian dropped to 11,800-11,900 yuan a tonne, with trading muted. 

Lead Prices Bounce After Diving To 5-Year Low

After hitting a fresh 5-year low in March, lead prices have risen 18% within the last four weeks. This price increase might seem impressive, but we need to remember that this type of bounce is normal after sharp price declines. We can see this happening with copper prices as well.

Most analysts argue that fundamentals are set to tighten and that should make prices rise.

Unconventional Market Movement

However, that’s what they said a year ago (good thing we didn’t) and prices are now well below last year’s levels. The market is expected to move into a deficit of around 100,000 metric tons this year as supply shrinks and demand (sort of) improves.

They might be right, however, as it’s always hard to tell what has already been discounted in the price. What we CAN tell you is that commodities continue to fall, driven by a strong dollar and low oil prices. This is having a depressing effect on industrial metals and most of them are at or near record lows.

Lead Outlook

We believe that this recent bounce in lead prices occurred because the metal needed time to digest a sharp decline, not because lead prices are set to increase.

The metal remains in a falling market and so do the rest of industrial metals. We believe that lead would need a real catalyst to inject upside momentum and trigger prices to climb above 2014 levels. In the meantime, we can’t expect this rally to last too long in the face of a bearish commodity market.

Source: MetalMiner

US Lead usage rises during Jan-Nov; EU down by 1.6

Lead usage In the United States increased by 3.9% during January to November, while demand Europe declined by 1.6%.

According to International Lead and Zinc Study Group, an increase in global demand for refined zinc metal of 5.4% was primarily a consequence of a reported rise in Chinese apparent demand of 10.5% during January to November.

The global market for refined zinc metal was in deficit by 255kt over the eleven months from January to November 2014 with total reported inventories declining by 326kt over the same period, said ILZSG report.

Falls in zinc mine output in Australia, Canada, India, Ireland and Namibia were more than balanced by increases in China, Mexico, Peru, Sweden and the United Sates resulting in an overall global rise of 1.9%.

Despite reductions in India and the United States, world refined zinc metal production rose by 4.2%. This was due mainly to higher output in China.

World refined lead metal supply and demand balanced during Jan-Nov '14

The latest statistics published by the International Lead and Zinc Study Group (ILZSG) indicates that global refined lead market was in surplus of 1,000 tons during the initial eleven-month period in 2014. The total reported lead inventories declined by 40,000 tons during the same period.

The lead mine production in Australia, Peru and the United States increased during the eleven-month period. But they were enough to partially cover the decline in production in other countries such as Bolivia, South Africa and China. The overall global lead mine production reduced by 2.8% when compared with the corresponding eleven-month period in 2013.

The world lead mine output during the ten-month period totaled 4.836 million tons as against 5.435 million tons during 2013.

The refined lead metal production during the eleven-month period totaled 10.300 million tons, 1.24% higher when compared with the 10.174 million tons output during corresponding eleven-month period in 2013. The refined lead metal production surged higher in China, India, Italy, Kazakhstan and the Republic of Korea, whereas it declined sharply in Japan and the US.

The global demand for refined lead metal increased by 1% to 10.299 million tons during the initial eleven-month period in 2014. The European apparent usage increased by 2.3%. China reported a demand rise of 1.2%. The apparent consumption in the US dropped by 0.6%.

Tight Supply to Bolster China Physical Lead Prices, SMM Says

Tightening supply of both primary and secondary lead is likely to bolster physical lead prices in China, says Zhu Rongrong, an analyst with Shanghai Metals Market.

Low secondary lead prices largely squeezed margins for smelters, leaving even unlicensed smelters unprofitable. This has resulted in massive stoppages in late 2014, especially at those unlicensed companies.

Furthermore, Anhui’s Huaxin Lead Industry Group has shut down smelters in its old factory zone due to a failure to meet environmental protection requirements.

Chinese November net Lead product exports hit 2014 high of 5,547 tons

China’s net exports of lead products, which include refined lead, lead alloy, lead plate, and other lead semis, hit 5,547 tons in November, the highest thus far in 2014, Customs reported.

China imported 1,402 tons of lead products in November, and exports climbed to 6,949 tons.

4,672 tons of refined lead and 1,872 tons of lead plate were shipped from China in November, with their combined number representing 94.2% of total lead product exports for the same month.

The SMM/LME lead price ratio left few profitable opportunities for lead exports, but many Chinese companies exported refined lead and lead plate in the form of processing trade, driving up the export volumes.

Taiwan and Vietnam were still major buyers of refined lead from mainland China, while lead plates were primarily exported to ASEAN members.

Rising production data a last straw for Lead

Lead market experienced sharp declines, with the February-lead on Shanghai Futures Exchange losing 7.74% yesterday and down by its daily limit at the open today.

What’s behind the collapse in lead prices?

“The increasing output data should be the last straw for lead prices,” an analyst from Shanghai CIFCO Futures told SMM in a recent interview.

“Lead prices have been falling this month, and the report that China’s refined lead climbed to a five-month high of 381,941 tons stoked fears for a severe glut in the market, resulting in a slump in prices,” the analyst explained.

Analyst from Ruida Futures also pointed out that noticeable rises in both lead concentrate and refined lead production in November definitely added to a drag on prices which had already been pressured by waning consumption and weak macroeconomic conditions.

Global Lead demand may rise to 11.33 MMT in 2014: ILZSG

The International Lead and Zinc Study Group said that global demand for refined lead metal will continue to exceed supply by a modest amount in both 2014 and 2015, forecasting a deficit of 38,000 mt this year and 23,000 mt in 2015.

Global demand for refined lead metal is forecast to rise by 1.4% to 11.33 million mt this year and by a further 2.1% to 11.56 million mt in 2015, the ILZSG said.

Group added that in China, despite a further increase in automotive output and an expansion in the construction of mobile phone base stations that require industrial lead-acid batteries for back-up power, demand growth is expected to slow to 2.5% in 2014 and 2.9% in 2015.

This is mainly due to a slowing of the increase of output of e-bikes that account for a significant portion of Chinese automotive lead-acid battery sales.

China's Lead Conc. Imports Hold High in Oct. on Higher TCs, Improved Market Fundamentals

China imported 176,600 tonnes of lead concentrate in October, holding high at the second highest this year, albeit a 13.01% drop from September, China Customs data indicate.

Lead concentrate supply in China has been tight this year, turning lead smelters to overseas market. 

The National Bureau of Statistics reported a 9.27% decline in China’s lead concentrate output in October, which aggravated concentrate shortages. 

Demand for the raw material started rising in September as some smelters built stocks for winter production.

Zinc's premium over lead to extend decline after peak

* Zinc premium over lead hits highest in nearly 6 yrs in late Oct

* Lead may close some of price gap on winter battery demand

* Doubts emerge on scope of zinc supply/demand deficits

(Reuters) - Zinc's premium over sister metal lead is likely to continue to slip in coming months after hitting a multi-year peak as lead demand climbs during the seasonally strong winter and amid doubt over the scope of projected deficits in zinc.

Zinc's price gap over lead expanded to a high of $297 a tonne at the end of October, the strongest in nearly six years, after investors piled into the zinc market on bets that the closure of big mines would lead to deep deficits.

The rich premium of galvanising metal zinc represents a big reversal in the relationship between the two metals, which are often used as the basis for trading strategies, using either the spread or the ratio.

The premium, based on London Metal Exchange benchmark prices, has since pulled back to $226.

The extent to which investors have bought zinc and shunned lead is out of proportion to fundamentals, some analysts argue.

Both metals are typically found in the same mines so lead supplies should also be affected by mines shutting down.

"Lead is moving into structural deficit at least in tandem with zinc, and lead inventories are much lower," BNP Paribas analyst Stephen Briggs said in a note. "The discount to zinc may narrow."

Instead of a premium, a year ago zinc was at a discount to lead by about $200 with zinc weighed down by heavy surpluses.

One reason the lead price has underperformed this year is disappointing demand, partly due to weak sales of electric bicycles in China which use lead-acid batteries. Batteries account for 80 percent of global lead consumption.

That side of the equation is likely to improve in coming months since battery makers often see increased business in cold weather due to increased battery failures.

"Usually lead is seasonably stronger into the back end of the year as well as January and February, so maybe we can see some of that underperformance unwound," said Citi analyst David Wilson.

Temperatures in all 50 U.S. states hit freezing or below this week as unseasonably cold weather moved across the country.

Many bullish zinc investors base their views on big supply/demand deficits developing, but some analysts say any shortfalls may be less than expected, which could curb zinc's gains.

Analyst Jessica Fung at BMO Capital Markets pointed to two recent expansion announcements - by Vedanta Resources at a new mine in South Africa and Boliden at its Odda smelter in Norway.

"These projects...indicate there are opportunities to close the deficit gap in the next few years," she said in a note.

Lead: Will it benefit from bitter cold in US, EU?

Snowstorm slammed some parts of the US, with temperatures plummeting, while central and northern Europe are expected to experience a colder winter this year. Will this extreme cold help lead prices repeat the rally seen in the last two winters?

The inclement weather in the winter of 2012 had boosted demand for ignition batteries and posed difficulty in scrap battery recycling. In response, LME lead neared a four-year high of $2,499 per tonne at the beginning of 2013. The same reason pushed the prices to a high of $2,289 a tonne in December 2013.

How about this year?

"We did see some positive signs," Zhu Rongrong, analyst with Shanghai Metals Market said.

LME cash-to-3-month contango fell to $3 per tonne last Friday, its lowest this year. Meanwhile, lead stocks in LME-approved warehouses have declined more than 10,000 tonnes so far this month. Physical lead premia in Europe and US posted noticeable rise in October, according to CRU data.

On the demand side, some European ignition battery makers have reportedly begun hoarding lead ingot against expectation for a colder winter. Besides, LMC Automotives said automobile sales in the US climbed 10% year-on-year January-September, and are expected to rise 5% throughout the year.

That being said, the road to a rebound may not be so easy.

"Something to take note of is news on smelter shutdowns, a part from the bitter cold, also contributed to the jump in prices in the past two winters," said Zhu.

Exide Technologies closed its 75,000 tpy secondary lead smelter in Frisco, Texas, in late 2012. Doe Run Company shut down its primary lead smelter in Herculaneum by the end of 2013. The smelter produced 110,000 tonnes of primary lead in 2013. Nonetheless, no closures have been reported thus far this year.

Moreover, a sharp rise in lead imports left lead supply ample in the US. The US imported 319,000 tonnes of refined lead in the first eight months, up 53% from a year ago. Now that traders are holding considerable stocks, goods availability in the country’s physical market will be subject to selling interest.

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.

Zinc deficit to be 366,000 T in 2015 -ILZSG

The global zinc market is forecast to have a deficit of 403,000 tonnes in 2014, dipping to 366,000 tonnes next year, the International Lead and Zinc Study Group (ILZSG) said on Monday.

The group also said, following its annual meeting, that the global lead market is forecast to be in a deficit of 38,000 tonnes this year and 23,000 tonnes in 2015.

In zinc, global demand for refined metal is expected to rise by 5.1 percent to 13.65 million tonnes this year and a further 2.9 percent to 14.05 million tonnes in 2015, the ILZSG said.

"These rises will be primarily driven by increased Chinese usage," it said in a statement.

Refined zinc metal output is forecast to rise by 2.9 percent to 13.25 million tonnes in 2014 and by 3.3 percent to 13.68 million tonnes in 2015 mainly due to further expansion of output in China, it added.

In lead, global demand for refined lead metal is forecast to increase by 1.4 percent to 11.33 million tonnes this year and by

2.1 percent to 11.56 million tonnes in 2015, the group said.

Growth in Chinese lead demand is due to slow this year.

"This is mainly due to a slowing of the increase of output of e-bikes that account for a significant portion of Chinese automotive lead-acid battery sales," it said.

World production of refined lead metal is forecast to edge up by 1.5 percent to 11.29 million tonnes in 2014 and rise by 2.2 percent to 11.54 million tonnes in 2015.

Natixis sees lead prices to average $2,120 a ton in 2015

Lead prices are expected to average $2,120 a ton next year and $2,195 per ton in 2016, said Natixis in its Metal Review.

Global demand for lead has remained weak in 2014 due to a second consecutive annual decline in Chinese apparent demand. While other base metal markets with stronger fundamental have seen prices push higher, lead prices have instead remained trapped in a narrow range.

In Natixis central scenario, the lead market is expected to remain in broad balance, helping to keep prices within this tight range. There are, however, significant uncertainties surrounding Natixis outlook for both supply and demand, which could result in unexpected price volatility in the years ahead.

Natixis analysis of supply and demand suggests that the lead market will run a cumulative deficit of perhaps 20,000 tons over the period 2014-16. With this in mind, Natixis forecasts a very modest increase in lead prices over the period 2015-16.

Lead Outlook: Rising Demand, Shrinking Supply Could Mean Higher Prices in 2014

It's been a good year for lead , and 2014 looks promising for the metal as well.

Rising demand and shrinking supply of lead have analysts optimistic that about what investors can expect in 2014.

2013 market performance 

Over the course of 2013, demand for lead rose significantly worldwide due to the the recovery in the auto industry in the U.S., the world‘s second-biggest market for lead. The U.S. doubled its lead imports over the first six months of 2013, influencing the price of the metal on the London Metal Exchange to rise more than 13 percent between May and June of 2013. Reuters reports the global market for lead tends to be consistent and balanced, meaning this surge is cutting into stockpiles and moving the market toward a deficit.

The World Bureau of Metal Statistics found U.S. imports of refined lead grew to 50,000 tons a month on average between November 2012 and March 2013 – leading those five months to come in at almost double the amount of lead the U.S. typically imports in a year.

"(Consumption) is likely coming from the auto sector because we know that the big three in the U.S. are at full capacity," Joel Crane, an analyst at Morgan Stanley, told Reuters.

However, lead plant closures have forced automakers and other end users of the metal to seek other sources, including looking to Asia for lead. The U.S. imports most of its lead from Australia, according to the World Bureau of Metal Statistics, which has an impact on the supply of the metal in Asia. The exception to this is China, the world‘s biggest producer and consumer of refined lead, which does not tend to export the metal due to export duties.

"Because the market is so finely balanced, it just needs a little bit of stronger demand or a few production problems to actually see a few pockets of shortage emerge," analyst Neil Hawkes of consultancy CRU, told Reuters.

In addition to rising demand in the U.S., lead traders have been seeing an increase in business in India, where demand is high. The middle class uses back-up batteries to weather summer power cuts, and these require lead.

"We have been doing a lot of business into India for the last month and a half," a dealer told Reuters. "To all parts, Chennai, the eastern parts, largely consumed by the battery segment."

India demands near half a million tons of lead a year, representing 5 percent of world reserves. At Malaysian ports, the price for lead was typically $70 to $80 higher than on the L​ondon Metal Exchange in mid-year 2013.

Leading the pack into 2014

According to the International Lead and Zinc Study Group, the global refined lead market experienced a significant deficit in the first half of 2013. The inventories at the LME and the Shanghai Futures Exchange alike are low. Because of low supply and increasing demand, 2014 looks good for lead. The Wall Street Journal predicts lead supply will fall short of demand in 2014.

"The market looks a lot tighter in terms of balance this year and next year," Joseph Murphy, a senior analyst at Hermes Commodities, told the WSJ.

The price of lead tends to rise in the colder months, as low temperatures often cause car batteries to fail. Because of this, manufacturers want to be ready with enough batteries to replace those lost to the cold. For this reason, many commodities traders look to put their capital on lead toward the end of the year and the beginning of the next. The growing demand for cars, and hence for lead, in developing economies is also bolstering the metal‘s price.

Car sales are rising – in China, they rose 21 percent year-over-year in 2013, while they rose 12.7 percent in the U.S. and 5.4 percent in Europe, according to the WSJ. This is good news for lead, which looks to have a promising year ahead.

Business Standard published an article about the future of base metals in 2014 and asserts the tapering of the U.S. Federal Reserve‘s quantitative easing program and the economic growth in China both point to investment capital coming back to base metals in the year ahead. The publication expects higher prices in the coming year on lead and other base metals. It cites lead as the best-positioned of the base metals in 2014 as the forecast calls for global supply deficits throughout the year.

China's Lead and Zinc Mines close after heavy rains

Heavy rains in Shaanxi Province, China, have negatively affected production in local lead & zinc mines, Shanghai Metals Market learns.

The impact in Hanzhong is in particularly big, according to SMM sources. There are four lead & zinc mines in Hanzhong, and it is heard that some mines have closed for a week following heavy rains. It remains unknown when production will be resumed.

Lead and Zinc mines in Shaanxi province are mainly distributed in Baoji, Hanzhong and Shangluo. The impact on mines in other two regions is small so far, SMM learns.

MCX-Lead (₹136.9): BUY

The price of the metal lead, which finds its major usage in batteries, has risen sharply since May. The lead futures contract traded on the Multi Commodity Exchange (MCX) has surged 10 per cent from ₹123/kg in May to ₹137 now.

According to the data from the International Lead and Zinc Study Group (ILZSG), the market for lead ran into a deficit in 2013 for the first time in the last few years. The deficit is expected to widen in 2014 to 50,000 tonnes from a deficit of 1,000 tonnes in the previous year. Slow-down in mine production, increase in demand and widening deficit could limit any fall in the lead price and keep the current up trend intact. This provides a good opportunity for both the short- and medium-term traders to go long in the MCX-lead futures contract.

Short-term view: The short-term outlook is bullish. The fall from the high of ₹140.75 recorded on August 5 found support at ₹133.5, the 38.2 per cent Fibonacci retracement level. The contract has reversed higher from this level thereby reversing the downtrend. Resistance is at ₹139. A strong break above this level can take the contract higher to ₹142.

Traders with a short-term perspective can initiate fresh long position now. Stop-loss can be placed at ₹134 for the target of ₹141.

Immediate support for the contract is at ₹135 and then the key short-term support is at ₹133.5. The outlook will turn bearish only on a strong break below ₹133.5. Such a break can take the contract lower to ₹130 in the short-term.

Medium-term view: The medium-term outlook is also bullish for the MCX-lead futures contract. The recent rally since June has decisively reversed the strong downtrend that was in place since the August 2013 high of ₹155.4. Also this reversal has happened upon forming a double bottom reversal pattern. The neckline support of this pattern is at ₹130. As long as the contract trades above this level, a rally to ₹148 looks likely in the medium-term.

Traders with a medium-term perspective can hold the long position with a wide stop-loss at ₹129 for the target of ₹147. Intermediate declines to ₹134 and ₹130 if seen can be considered for accumulating more long positions.

The medium-term outlook will turn bearish if MCX lead futures contract declines below ₹130. The ensuing target will be ₹120.

Business Line