After testing the significant resistance at ₹182 per kg for more than three weeks, the zinc futures contract on the Multi Commodity Exchange (MCX) resumed its downtrend last Friday by declining 1.9 per cent.

This fall has breached its 21-day moving average and also strengthens the downtrend that has been in place since encountering resistance at ₹219 in early June.

While trending down, the contract had decisively breached key supports at ₹200 and ₹190 in the month of June and early July, respectively.

However, the contract found support at around ₹170 in mid-July and has been in a short-term sideways movement in the band between ₹170 and ₹182 since then. The contract has fallen 2.6 per cent over the past two trading sessions and is currently trading at ₹171.8/kg.

The medium-term trend is downtrend for the contract. Further the short-term sideways movement is biased downwards. An emphatic downward break of ₹170 will reinforce the downtrend and drag the contract lower to ₹165 and ₹160 levels in the short-term.

Nevertheless, an upward reversal can keep the contract moving sideways in the range between ₹170 and ₹182 for a while.

To bring back bullish momentum, the contract needs to conclusively breach the resistance at ₹182. Such a break will ease the selling pressure and take the contract higher to ₹185 and ₹190 levels. Next vital resistance is pegged at ₹200.

Trading strategy

Traders with a short-term perspective can go short on a decisive fall below ₹170 with a stop-loss at ₹174. Targets are 165 and ₹160 levels.

Revise the stop-loss at ₹170 as the contract slumps below ₹165 levels.

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

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