Zinc futures trade firm at Rs 188.50 per kg, further upside seen

Zinc prices edged higher to Rs 188.50 per kg on October 6 as participants increased their long positions, as seen by the open interest. Zinc futures were trading at the day’s high tracking weakness in the dollar and improved risk appetite.

Zinc prices are getting support from decline in stock at SHFE-approved warehouses. However, higher stocks at LME and widening supply surplus may cap the upside.

Sachin Gupta, senior research associate at Choice Broking said, "On the daily chart, MCX October Zinc futures have formed a bullish Marubozu Candlestick pattern, which indicates reversal of a trend and increase buying in the counter. Moreover, price has also reversed after taking support at 50 percent retracement level of its prior trend."

"Furthermore, price has found support at the lower Bollinger Band and 100-day Exponential Moving Average, indicating an upward movement in the short term," he said.

In the futures market, zinc for October delivery touched an intraday high of Rs 189 and a low of Rs 185.70 per kg on the MCX Index. So far in the current series, the base metal has touched a low of Rs 181.25 and a high of Rs 199.35.

Zinc delivery for October contract gained Rs 2.55, or 1.32 percent, to Rs 188.50 per kg at 7:37 pm with a business turnover of 2,251 lots. The same for November contract rose Rs 2, or 1.09 percent, to Rs 186.30 per kg with a turnover of 241 lots.

The value of October and November’s contracts traded so far is Rs 637.07 crore and Rs 18.76 crore, respectively.

The Relative Strength Index (RSI) has pulled back from the trendline support suggesting further strength in the prices. Based on the above technical structure, Gupta expects a bullish movement in MCX October Zinc towards the level Rs 197 in the near term.

At 2:10 pm GMT, the base metal was up 1.25 percent at $2,361.25 per tonne in London trading.