The uptrend in the futures contract of zinc, that was established in March last year, has since then faced challenges twice. First, between August and October last year and second, during the current month. While the bulls were able to regain traction and re-establish the upward movement in October, the futures looks to struggle this time.

The February futures contract, which was in a consolidation phase since early December, trading between ₹214 and ₹225, decisively broke below the lower boundary of the price band on Wednesday. This could be an indication that the contract might witness at least a corrective decline if not an outright trend reversal.

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This downward bias was built-up through the consolidation phase. This can be observed from the movement of indicators like the relative strength index (RSI) and the moving average convergence divergence (MACD) indicators on the daily chart. The relative strength index (RSI) has been declining throughout the consolidation period and it entered the bearish zone. The moving average convergence divergence (MACD) has been charting a downward trajectory in the corresponding period and has slipped into the negative territory.

The 21-day moving average (DMA) is now below the 50-DMA. So, sell the contract with stop-loss at ₹216. It can fall to ₹200 and possibly to ₹190. Given the above indications, the contract is likely to depreciate from the current levels and so, traders can sell with stop-loss at ₹216. Price can fall to ₹200, below which the futures can be dragged to ₹190.

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