The Zinc futures contract on the MCX extended its fall in the initial part of last week but reversed sharply higher recovering all the loss. The contract made a low of ₹183.4 per kg on Wednesday last week and bounced back sharply. It is currently trading at ₹191 per kg.
The 55-DMA at ₹184 has held well and has halted the corrective fall that has been in place since the first week of this month.
A key resistance is in the ₹191-191.5 region. Inability to breach ₹191.5 can pull the contract lower to ₹185 and ₹184 again. In such a scenario, a range-bound move between ₹184 and ₹192 is possible for some time. A strong break below ₹184 will bring renewed selling pressure on the contract and drag it to ₹180 or even ₹175.
On the other hand, if the MCX-Zinc futures contract breaks above ₹191.5 decisively, it can gain momentum. Such a break will then increase the likelihood of the contract rallying to ₹200 and ₹203 levels in the coming weeks.
Medium-term traders who have taken long positions at ₹195 and ₹193 can hold it. Retain the stop-loss at ₹183 for the target of ₹212. Revise the stop-loss higher to ₹202 as soon as the contract moves up to ₹208.
Global trend
The Zinc (three-month forward) contract on the LME fell, breaking below the key support level of $2,650 in the past week. The contract recorded a low of $2,575 and has bounced from there.
Inability to rise past $2,650 can keep the contract under pressure. In such a scenario, the contract will remain vulnerable to break below $,2575 and fall to $2,500.
But a strong break and a decisive close above $2,650 will ease the downside pressure. Such a move will then keep the outlook bullish and take the contract higher to $2,800 levels.