The price of zinc futures on Multi Commodity Exchange (MCX) displayed signs of bearish reversal after witnessing a strong rally since April last year.
After beginning its rally from about ₹140, the futures contract reached ₹225 levels in the final week of November and started to move sidewards. Thereafter, it began to waver between ₹214 and ₹225.
But, in mid-January 2021, the contract went below the support at ₹214, essentially breaking down the range.
Normally, following a strong rally, when price falls below the lower boundary of the consolidation range, it is considered as a sign of bearish trend reversal. However, the decline was arrested at around ₹204.
After a brief period of moving sideways, the futures started to move northwards, aligning with the major bull trend. Buyers pushed the price above both 21- and 50-day moving averages — above the previous high of ₹226.6. Apparently, the fresh breakout has renewed the upward momentum.
Affirming the bullish bias, the relative strength index and the moving average convergence divergence indicators on the daily chart stays in their respective bullish territory.
Also, the average directional index is signalling that upward price movement is strong. The above factors show that the price is likely to move further up.
Traders can go long in February futures; stop-loss can be placed at ₹223. The contract can rally towards ₹236 and ₹242.