The Zinc futures contract on the Multi Commodity Exchange (MCX) had bounced back in the past week, but failed to sustain higher. The contract recorded a high of ₹204.9 per kg last Thursday and has come off sharply from there. The contract has tumbled over 4 per cent from its high of ₹204.9 and is currently at ₹196.5 per kg.

The ₹200-₹210 resistance cluster has capped the upside as expected. This keeps the bearish outlook intact. As mentioned last week, there is a complex head and shoulders reversal pattern visible on the chart. The neck-line of this pattern is at ₹200, which is likely to cap the upside in the coming days.

A fall to ₹190 is possible in the near term. A bounce from ₹190 can trigger an intermediate up-move to ₹195. However, the overall bearish outlook will continue to remain intact for the contract. Any intermediate bounces can attract fresh selling interest into the market at higher levels. As such, an eventual break below ₹190 will then increase the likelihood of the contract tumbling to ₹175 over the medium term.

Trading strategy

Traders with a big appetite for risk and a medium-term perspective who have taken short positions last week at ₹196, ₹199 and ₹203 can hold them. Retain the stop-loss at ₹211. Revise the stop-loss lower to ₹193 as soon as the contract moves down to ₹187. Book profits at ₹175.

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

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