The Zinc futures contract on the Multi Commodity Exchange of India (MCX) fell in the past week as expected to test the ₹191-₹190 per kg support zone. The contract made a low of ₹189.15 on Friday and has bounced from there. It is currently trading at ₹195 per kg.
The near-term outlook is mixed. There is an equal chance of the contract moving higher to ₹200-₹202 or even falling to ₹190-₹188 again from current levels. So, traders can stay out of the market until a clear trend emerges.
However, the indicators on the charts are positive signalling that the downside could be limited. Cluster of moving average supports are at ₹187 which can arrest the fall even if the contract declines below ₹190. Also, such dips to ₹190-187 band will be a good opportunity to buy the contract from a medium-term perspective.
On the other hand, a strong break and a decisive close above ₹203 is needed for the MCX-Zinc contract to gain fresh momentum. Such a break will see the contract targeting ₹215 and ₹220 over the medium term.
Broadly, the MCX-Zinc futures contract can trade sideways between ₹187 and ₹203 before we seen an eventual rally targeting ₹215 and ₹220 in the coming weeks.
Trading strategy
Traders with a medium-term perspective can make use of dips and go long at ₹191 and ₹188. Stop-loss can be placed at ₹181 for the target of ₹213. Revise the stop-loss higher to ₹195 as soon as the contract moves upto ₹201.
Global trend
The Zinc (3-month rolling forward) contract on the London Metal Exchange (LME) has been facing strong resistance at $2,800 per tonne. It is currently trading at $2,730. A fall to $2,630 or $2,600 is possible as long as it trades below $2,800.
A strong break above $2,800 is needed to gain fresh momentum. The next target is $2,900.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.