The reversal from the January 14 low of ₹124.45 a kg in zinc futures traded on the Multi Commodity Exchange (MCX) seems to be losing momentum. The contract, after recording a high of ₹132.8 on Thursday, has started to trend lower.

The overall outlook remains bearish and there is a strong likelihood for the commodity to fall further in the short-term.

This offers a good opportunity for short-term traders to initiate fresh short positions in the contract.

Short-term view: The sharp pull back from the high of ₹132.8 suggests that the upmove from the low of ₹124.45 recorded in January is just a corrective rally. Key short-term resistances are ₹133 – the 21-day moving average and at ₹135 – the 200-day moving average resistance level.

The contract is expected to remain under pressure as long as it trades below ₹135.

A fall to ₹124 looks likely in the coming weeks.

Traders with a short-term perspective can go short at current levels. Stop-loss can be placed at ₹133.5 for the target of ₹125. Intermediate rallies to ₹133 can be considered as opportunities to accumulate more short positions.

The short-term outlook will turn positive only on a strong break above ₹135. Such a break can take the contract to the next targets of ₹138 and ₹140.

Medium-term view: The medium-term trend is also down. However, this downtrend could be nearing a bottom.

There is a strong trendline support at ₹124 which is likely to halt the downtrend that has been in place since August last year. A reversal from this support at ₹124 will have the potential to target ₹135 or even ₹140 over the medium-term.

On the other hand, a decisive fall below ₹124 can increase the chances of a further fall to ₹120 and ₹116.

Note: Price as of 6 PM on Tuesday. The recommendations are based on technical analysis. There is a risk of loss in trading.

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