BL Research Bureau
Zinc price has been falling since October and consequently, the continuous futures contract of the metal on the Multi Commodity Exchange (MCX) also witnessed a considerable price drop. That is, after hitting a high of ₹326.6 in mid-October, the contract reversed the trend. It soon dropped below ₹300 and a month back it slipped below the support at ₹280.
Because of the swift fall in price, the 21-day moving average (DMA) has dropped below the 50-DMA, an indication of the medium-term trend turning negative. The relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart has been on a descend since past couple of months. These factors hint at further depreciation.
But since the contract has largely been flat of late, the RSI and the MACD is turning flat. However, this does not indicate a bullish trend reversal and the price action denotes that as long as the contract is below ₹280, the likelihood of more decline in price is high. A drop below ₹280 can drag it to the support at ₹260. A breach of this level means the futures can touch ₹250. On the other hand, resistance above ₹280 can be spotted at ₹290.
Considering the above factors, traders can initiate fresh short positions at current level and add more shorts when price rises to ₹280. Place initial stop-loss at ₹290. Book profits at ₹250. When price moves below ₹260, revise stop-loss to ₹270.