The September futures contract of zinc on Multi Commodity Exchange of India (MCX), which began the rally in early July from about ₹160, registered a high of ₹200 in August, gaining by about 25 per cent in a span of two months. However, after marking a high of ₹200, the contract seems to have lost momentum and started treading in a horizontal pathway i.e. the price has been oscillating in the band between ₹186 and ₹200.

Observing the indicators, the picture is unclear. The daily relative strength index, which declined below the midpoint level of 50 briefly, is now back above that level. But the moving average convergence divergence indicator, though staying in the positive territory, is tracing a downward trajectory. Considering this, even though the major trend is inclined to upside, the next leg of trend cannot be confirmed until either ₹186 or ₹200 is breached.

If the contract regains momentum and rises, it is likely to face a strong hindrance at the psychological level of ₹200. But a breakout of this level can result in a sharp uptrend, possibly lifting the contract to ₹210. On the other hand, if the contract slips below the support at ₹186 and depreciates, it is likely to find support at ₹180. Below that level, the support can be spotted at ₹168.

On the global front, the three-month rolling forward contract of zinc on London Metal Exchange has witnessed a correction from $2,575 to $2,400 during the first two weeks of September. The contract is currently hovering at $2,500. Nevertheless, the price action remains bullish and the price is likely to move up from the current level.

Trading strategy

Even as the trend remains bullish globally and the MCX contract is trading above the support at ₹186, the price should breach the resistance of ₹200 to build a sustainable upward momentum. Hence, traders can buy the contract with stop-loss at ₹190 if the price breaks out of ₹200.

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