The Zinc futures contract traded on the Multi Commodity Exchange (MCX) fell 2.8 per cent to close at ₹125.5 per kg in the previous week, after encountering a key resistance at ₹130.
The contract has formed a bearish engulfing candlestick pattern in the weekly chart, which is a bearish reversal pattern, signals trend reversal.
On Monday, the contract declined 2.7 per cent, breaching its 21-day moving average as well as a key support at ₹124.5.
However, the contract found support at the 50-day moving average and the medium-term up trend-line at ₹122, and bounced up more than 1 per cent on test as a mark of respect to this trend-line support.
As the contract has reversed from a significant long-term resistance level of ₹130 and this downward reversal is backed by negative divergence in the daily price rate of change and moving average convergence divergence signify that the possibility of breaching the trend-line support is high.
The short-term outlook is bearish. Traders with a short-term perspective can consider selling the contract with a stop-loss at ₹128 levels.
Short-term view: The short-term uptrend that started from the early April low at ₹116 has come to a halt after encountering a key resistance at ₹130 levels last week.
The contract has since trended downwards. A decisive fall below the immediate support at ₹122 can drag the contract down to ₹120 and then to ₹116 in the short term. Key immediate resistances are at ₹126 and ₹130.
Medium-term view: Since taking key support at around ₹98 in early January, the contract has been on a medium term uptrend. As long as the contract trades above the vital support at ₹113, the medium-term uptrend will remain in place.
But, a conclusive fall below ₹113 will mitigate the uptrend and drag the contract to ₹110 or ₹107 in the medium term horizon. On the upside, an emphatic breakthrough of ₹130 will reinforce the uptrend and take the contract northwards to ₹134 and then to ₹138-140 band.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.