Zinc futures contract on the Multi Commodity Exchange (MCX) has fallen sharply in the past week. The contract has tumbled over 5 per cent intra-week to make a low of ₹194.85 per kg. It has bounced slightly from this low and is currently trading at ₹196 per kg. The contract has been falling consistently over the last couple of weeks by about 10 per cent.

Outlook

The sharp fall below ₹200 has turned the outlook bearish. Cluster of resistances are poised in the broad ₹200-₹210 region. Intermediate bounce to this resistance region is likely to find fresh sellers coming into the market.

Also, there is a head and shoulder pattern visible on the chart. This is a bearish reversal pattern. The neckline resistance of this pattern is at ₹200 which is likely to cap the upside in the near term.

A fall to ₹190 is likely in the coming days. If the contract manages to bounce from ₹190, a relief rally to ₹200 is possible. However, the overall bearish outlook will continue to remain intact as further rally beyond ₹200 will be less probable. An eventual break below ₹190, will increase the possibility of the contract tumbling towards ₹175 over the medium term.

Trading strategy

High risk appetite traders with a medium-term perspective can go long at current levels and on rallies at ₹199 and 203. Stop-loss can be placed at ₹211 for the target of ₹175. Revise the stop-loss lower to ₹193 as soon as the contract moves down to ₹187.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading

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