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The Zinc futures contract on the Multi Commodity Exchange (MCX) fell in the past week, as expected. The contract tumbled about 5 per cent intra-week and made a low of ₹163.8 per kg on last Friday. The contract has, however, bounced back from this low, recovering most of the loss, and is currently trading at ₹171 per kg.
The immediate outlook is mixed. Traders can stay out of the market until a clear trend emerges.
A key resistance is ahead at ₹172. If the contract manages to breach this hurdle, a relief rally to ₹175 is possible on the back of short covering. A further break above ₹175 will then increase the likelihood of the corrective rally extending to ₹177 or even to ₹180.
On the other hand, if the MCX-Zinc futures contract fails to break above ₹172 in the coming sessions and reverses lower, it may come under renewed pressure.
In such a scenario, the downtrend that has been in place since March will remain intact. The contract can fall to ₹160 in the short term.
The level of ₹160 is a crucial 200-week moving average support. If the contract manages to bounce from this support, a range-bound move between ₹160 and ₹172 is possible for some time.
But if the contract breaks below ₹160 decisively, the contract can fall to ₹155.
A further break below ₹155 will then increase the likelihood of the contract tumbling to ₹150 or even ₹146 over the medium term.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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