Metal Rally Slows as Heat Fades Near the Peak; Nifty Metal Faces Profit Booking

The strong rally in the Nifty Metal index is showing early signs of fatigue, with prices slipping nearly 2% after failing to sustain above recent swing highs. The move suggests profit booking at elevated levels, as momentum cools following a sharp uptrend over the past few months.

Nifty Metal: Momentum Eases After Sharp Run-Up

After an extended rally, Nifty Metal has broken below its short-term rising trendline and is now trading below the Supertrend band, signalling a loss of immediate upside traction. This marks a shift from aggressive buying to a more cautious phase, where participants appear to be locking in gains.

The index’s inability to hold above recent highs indicates selling pressure emerging near the top, rather than fresh accumulation at higher levels.

Negative Divergence Raises Caution

Momentum indicators are flashing early warning signals:

• RSI has formed a clear negative divergence, rolling over from the overbought zone
• This divergence suggests weakening momentum despite prices trading near highs
• MACD momentum has also started flattening, indicating slowing trend strength

Such setups often precede consolidation or corrective phases, especially after strong rallies.

Volumes Hint at Distribution, Not Accumulation

While the broader trend remains intact, recent volume behaviour is less encouraging. The slowdown in volumes during the recent up-move suggests distribution rather than healthy consolidation, reinforcing the cautious near-term outlook.

Key Levels to Watch

• Immediate resistance: 12,120 (reclaiming this level on a closing basis is crucial to revive upside momentum)
• Immediate support: Near the 50-day moving average
• A sustained move below short-term supports could open the door for a deeper retracement or range-bound consolidation

As long as the index holds above the 50-day average, the broader trend remains structurally positive. However, failure to reclaim key resistance levels quickly may prolong the corrective phase.

Outlook: Consolidation Likely Unless Momentum Revives

The broader uptrend in metals is not broken, but the recent price action indicates that the rally has entered a cooling-off phase. Unless Nifty Metal swiftly reclaims the 12,120 zone, the index may continue to consolidate or retrace further as excess optimism unwinds.

For now, traders should remain selective, avoid chasing momentum, and watch for confirmation through price strength and volume expansion before positioning for the next leg higher.