Trading volatility in the market increased last week as the spot contract gyrated within a wider band of 1,539.50 and 1,465. The initial support at 1,471 was penetrated, leading the March contract to rebound soon after breaching this line. It was a successful coup for the bulls as the spot contract managed to reverse this correction mode to end the week on a high note.
The short-term correction to the low of 1,465 last week was an important technical signal signifying that the key support for the market remains at 1,471. Moving ahead, we can expect a trading channel to be established between this level and its upper resistance line.
The rising daily Commodity Channel Index and the Relative Strength Index are back in the overbought region again. Both these signals have been gyrating wildly in early part of the week, only to recover to the overbought line by Friday.
As for this week, we are not expecting anything different as some pullback activities are expected before any recovery is to take place again.
The direction of the weekly chart has been altered slightly as it has initiated a rebound from the base of the Bollinger Band. Some weak correction may materialise but it may not be severe as the rest of the weekly indicators have somewhat normalised. This could play down the seriousness of the bearish bias mentioned in the previous article.
Tactically, we may see the futures continuing to consolidate but within a wider band.
The shooting star candlestick pattern, however, brings with it some concern of looming corrective pressure in the immediate term. Key support can be located at 1,500.
The daily Commodity Channel Index finished at the overbought.