Support and resistance levels play a pivotal role in guiding trading decisions for MCX gold and silver contracts. These levels act as key reference points, offering insights into potential price movements and aiding traders in making informed choices. Here, we delve into the significance of support and resistance levels and explore effective strategies for incorporating them into trading decisions.

1.Horizontal support and resistance

Horizontal support and resistance levels are established based on previous price action where the price has historically struggled to move below (support) or above (resistance) a certain level. Traders can identify these levels by observing price movements and identifying areas where price has repeatedly reversed direction.


Support: At Rs. 70,000, the price of MCX Gold has consistently found buying interest, leading to reversals in price direction.

Resistance: Conversely, at Rs.76,000, MCX Silver has faced selling pressure, resulting in price reversals.

2.Trendline support and resistance

Trendline support and resistance levels are drawn by connecting consecutive lows (for support) or highs (for resistance) on a price chart. These trendlines provide valuable insights into the prevailing market trend and potential areas of price reversal.


Support Trendline: By connecting multiple lows, a trendline can be drawn, indicating the overall upward trend in MCX Silver prices.

Resistance Trendline: Conversely, connecting consecutive highs establishes a trendline, highlighting areas where MCX Gold prices have faced selling pressure.

3. Using previous resistance as new support and vice versa

One effective strategy is to utilize previous resistance levels as new support once the price breaks above them, and vice versa. This phenomenon, known as “role reversal,” occurs when a resistance level is breached, leading to a shift in market sentiment.


Previous Resistance Becomes Support: MCX Silver prices breaks and holds above the Rs. 70,000 resistance level, after Mar2022, has since then acted at support zone traders can anticipate this level to act as support in future price movements.


Incorporating support and resistance levels into trading strategies for MCX Gold and Silver contracts empowers traders with valuable insights into potential price movements and areas of price reversal. By understanding the significance of horizontal and trendline support and resistance levels and utilizing role reversal concepts, traders can make informed decisions and navigate the precious metals market with confidence. As with any trading strategy, it’s essential to combine technical analysis with risk management principles and adaptability to changing market conditions for sustained success.

(The author is Vice President Research Commodity & Currency at LKP Securities)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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