Last week, the zinc futures contract on the Multi Commodity Exchange (MCX) tumbled 6.7 per cent accompanied by good volume. Reinforcing the downtrend, the contract fell by 4 per cent on Monday to close at ₹170.8 per kg.
Following a sharp fall and the daily relative strength index hovering in the oversold territory, a corrective up-move can’t be ruled out at this juncture.
Moreover, the contract has a key support at around ₹170. Testing support at this level, the contract managed to gain 2 per cent today and currently trades at ₹174.2/kg. A corrective up-move from the current support level of ₹170 can take the contract higher to ₹178 and then to ₹180 in the near term.
A strong break above ₹180 can extend the corrective up-move to ₹184 and ₹187 levels. As long as the contract trades below ₹195, the short-term downtrend that has been in place from the June high of ₹219 will remain intact.
Failure to move beyond ₹180 can drag the contract down and it can re-test the support at ₹170. However, a downward break below ₹170 can drag the contract down to ₹165 and ₹160 levels in the ensuing weeks.
Traders who had taken short positions earlier can consider booking profits now.
A decisive plunge below ₹170 will be cue for initiating fresh short positions with a fixed stop-loss at ₹175. Targets are ₹165 and ₹160.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.