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- MCX Silver hit record low on aggressive sell off
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By Ankush Kumar Jain
There exists no doubt regarding the unchallenged superiority of lead when it comes to its out -performance of the base metal complex.
Subsequent to yearly comparison of price movements of all the base metals on the MCX and LME, it has been proven that lead is leading from the front. The commodity has given 17.50% return on the MCX and 14% return on the LME.
Technical outlook
Technically on monthly charts, lead futures formed an almost symmetrical triangle formation. When this pattern forms in an uptrend then it is considered a continuation pattern if the market breaks out to the upside and a reversal pattern if the market breaks to the downside.
Open Interest of lead futures have also been increasing rapidly over the monthly charts since past 5 years and currently the open interest of lead futures roam at the highest level, which is also indicative of a bullish sign for the prices. Traders are much more bullish on lead prices for the upcoming period as they are still holding their positions at the highest price level of 2012.
Currently prices are trading in the range of symmetrical triangle formation and a breakout to the upside trail can take lead prices to Rs 154 for the next year; the current range for lead prices is 129-112. The anticipated breakout to any of the sides can give a clear direction for lead prices for the next year.
According to Fibonacci price extension, lead futures have a crucial support at Rs 90 which is 23.6% level of Fibonnaci even as it has strong resistance at Rs 135 for the year 2013. If prices breach the Rs.135 levels then it may move up to Rs 154.
If lead futures are unable to break Rs.129 levels on the higher side and gets to be traded below Rs.122, which is 61.8% support level of Fibonnaci price extension, then it may move further down to 38.2% level of Fibonnaci for short term period and may touch Rs.112 and Rs.104 levels.
Long term traders are advised to take a buying position in lead futures around Rs.102-100 with stop loss of Rs.90 and wait for the target of Rs.134-150 for the year 2013.
Fundamental Outlook
--Globally, demand for refined lead may climb by 3.4% to 10.80 million tons in 2012 and 3.3% to 11.15 million tonnes in 2013. This marks a steady trend.
--After the environmentally motivated cutbacks in 2011, China's lead-acid battery production and exports have recuperated strongly. Usage is expected to climb by 4.8% this year and 4.7% next year.
--While there could be a small-scale downturn in shipments of replacement automotive lead-acid batteries, demand for lead in the US is expected to jump by 3.9% in 2012 as growth in original equipment and industrial battery sectors accelerate further. But in 2013, it is expected that the nation would only see 0.6% growth.
--World lead mine output may rise by 10.9% to touch 5.21 million tons in 2012 and by 2.8% to reach 5.36 million tons in 2013.
(Ankush Kumar Jain is Research Analyst, Commodity Online)
