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The zinc futures contract on the Multi Commodity Exchange (MCX) made a high of ₹180.5 per kg on August 28 and has reversed lower from there. The contract has fallen 2.8 per cent and is now at ₹175.5/kg.
The pull-back in the past week indicates that the contract lacks fresh buying interest to take it decisively higher.
A key resistance at ₹179 has halted the up-move that had begun from the August low of ₹163.8. As long as the contract trades below this resistance, a dip to ₹171 is likely in the near-term. A strong break below ₹171 will bring selling pressure on the contract. Such a break will then increase the likelihood of the contract tumbling to ₹165 or even ₹160.
Traders can stay out of the market until a clear trade signal emerges.
The contract has to surpass the hurdle at ₹179 in order to bring back the bullish momentum. Such a break will ease the downside pressure and take the contract higher to ₹182 and ₹183.
A further, decisive break above ₹183 will then pave the way for a fresh rally to ₹186 and ₹190 in the coming weeks.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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