Zinc price has been on a free fall since last month. The zinc futures contract traded on the Multi Commodity Exchange (MCX) has tumbled over 15 per cent from the high of ₹154.35 a kg recorded on May 6. Slow down in the global demand, especially from China, the largest consumer of the metal and a weak outlook for the global growth has put the metal price under pressure.

The downtrend is strong and it has room left to extend the fall in the coming weeks as well. This offers a good opportunity for short-term traders to initiate short positions in the contract.

Short-term view: The downtrend that has begun in May remains intact and looks strong. Immediate resistance for the contract is at ₹131 and then a key short-term resistance is in the ₹133-135 zone.

As long as the contract trades below these resistances the downtrend can extend in the coming days targeting to ₹126 and ₹125.

Traders with a short-term perspective can go short. Stop-loss can be placed at ₹132 for the target of ₹126.

The downside pressure will ease only if the contract records a strong break and close above ₹132. Such a break can take the contract higher to ₹135 there after.

Medium-term view: The medium-term view is also bearish. But there is a key trend-line support poised at ₹126. Whether contract breaks below this support or not will decide the next leg of move.

A strong break and a weekly close below ₹126 will strengthen the contract’s downtrend. In such a scenario, the contract can fall ₹120 or even ₹118 there after.

On the other hand, if the contract reverses higher from ₹126, a rise to ₹135 is possible. A strong break above ₹135 will wipe out the downside pressure completely.

Such a break will open doors for the contract to trend northwards to the next targets of ₹140 and ₹143.

Note: Price as of 6PM on Tuesday. The recommendations are based on technical analysis. There is a risk of loss in trading.

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