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The continuous futures contract of zinc on the Multi Commodity Exchange (MCX) rallied in March and April on the back of the support at ₹215. However, in May, the contract started to lose momentum and began moving across a sideways trend. Although it hit a new high of ₹244.5 in mid-May, it was unable to produce a follow through rally. The price action on the daily chart shows that the futures was largely held within the support band of ₹228 and ₹230, and the resistance at ₹242.
But of late, the contract has put on display a bearish bias i.e., last week, the contract saw a sharp fall wherein the price declined from ₹242 levels to the support at ₹230. Following this fall, the relative strength index (RSI) and the moving average convergence divergence (MACD) indicators are showing negative bias. While these are not encouraging signs for the bulls, the support band of ₹228 and ₹230 has so far withstood the selling pressure and the contract continues to trade above these levels. So, unless these levels are taken out, the likelihood of further fall is low. In fact, the price patterns since early May – oscillating between ₹230 and ₹242 – suggest that the contract could go higher from the current levels.
Hence, traders can risk going long at current levels with a tight stop-loss. The contract might retest the range top of ₹242.
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