The May futures contract of zinc on the MCX has been gradually gaining since the beginning of the week. The contract, currently trading at ₹157, is testing the resistance in the band between ₹157 and ₹160. The 50 per cent Fibonacci retracement level of the previous downtrend, also at ₹160, makes it a critical level.

Considering the price action on the daily chart, it has been forming higher highs and higher lows. Also, the price has rallied past both the 21- and 50-DMAs and the 21-DMA has crossed over the 50-DMA — a bullish indication.

Corroborating the bullish bias, the daily RSI has gone above the midpoint level of 50. Moreover, the Moving Average Convergence Divergence (MACD) indicator on the daily chart is in a strong upward trajectory and has entered the positive territory.

On the back of the prevailing bullish bias, if the contract breaks out of ₹160, it can turn the medium-term trend positive. The immediate hurdle is at ₹170. A breakout of that level can lift the contract to ₹175. On the other hand, if the contract weakens it will find support at ₹150. A break below that level can drag the contract to ₹145.

On the global front, the three-month rolling forward contract of zinc on the London Metal Exchange (LME) has been exhibiting bullish bias since the beginning of the month. The contract is currently trading above the critical level of $2,000 and it has been forming higher highs and higher lows. If it can sustain above $2,000, the likelihood of a rally is more which can potentially lift the contract on the MCX as well.

Trading strategy

The respective contracts on the MCX and the LME are exhibiting bullish bias. But the MCX-Zinc contract has a substantial resistance at ₹160. So, traders can initiate fresh long positions if the contract breaks out of ₹160. Place stop-loss at ₹150.

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

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