Risk aversion and stronger dollar have victimized base metals complex. We have seen sharp correction in copper, nickel, zinc and lead. Despite of drawdown in inventories, copper prices plummeted on LME.

Industrial metals slid on Monday with copper tumbling about 5 percent as skidding equities underlined concern about the economy and demand, while a stronger dollar exerted downward pressure. Copper inventories in LME warehouses fell by 7,300 tonnes to 462,325 tonnes, having dropped nearly 80,000 tonnes since mid-February. Cancelled warrants stocks earmarked for delivery rose to 68,325 tonnes from 64,400 tonnes on Friday.

COMEX copper stocks rose 64 short tons to 47,608 short tons on Friday. COMEX noncommercial net short position grew to 18,861 lots for the week ended April 14, from 17,398 lots the week earlier. Nickel prices have surged since the end of March, rising by over 30% from around USD 9,400 per tonne to USD 12,300 per tonne. The price has exhibited a certain amount of stability since late 2008, reflecting the fact that plunging demand has been offset by a constant stream of production cut announcements, but yesterday even Nickel prices fell down tracking weakness in other metals.

Vale said on April 16 it will shut its nickel mining and processing operations in Sudbury, Ontario, for eight weeks beginning June
1. Yunnan Copper Co Ltd, China's third-largest copper producer, said on Tuesday its production in the first quarter fell 34 percent from a year earlier due to the global financial crisis. Cuba's three nickel processing plants remain open despite low international prices, state-run radio said during the weekend in a report that urged workers to improve efficiency.

Rio Tinto plans to sell its 27 percent stake in a Chinese aluminum processing joint venture to its partner Shenzhen Zhongjin Lingnan Nonfemet, China's third-largest zinc producer said on Tuesday.

We believe base metals prices may trade down during the day as risk aversion has mounted and dollar has been strengthening rapidly. Hence the trading strategy in all these metals is: sell on rise.

Copper: Copper prices have breached the trend line and achieved our target of 233 yesterday. Looking at the chart, copper can continue further down-side till 227 levels. Below 227, prices can fall to 222 levels. Traders need to remain alert at 222-218
(61.8% retracement) levels as prices can take support and move upside from here.

Lead: The lead prices are facing resistance at the upper levels. We can see a three soldier pattern on top. Thus, prices can fall back to 71 levels on breaking the support at 73.75 levels. Thus one can sell around 73.75 levels for lower target of 71.5. with a Stop Loss of 74.25.

Nickel: Nickel Prices also bear the same pattern and are expected to fall back to 590 levels on breaking the support at 604 levels. Thus one can remain short in Nickel for target 590.

Zinc: Zinc prices are also facing resistance at the upper levels. Prices can fall back to 71 levels, on breaking the support at 73.5 levels.