Stocks

MCX-Zinc takes sideways path

Akhil Nallamuthu BL Research Bureau | Updated on August 13, 2020 Published on August 14, 2020

The price of zinc, that was gradually moving up in April and May, picked up momentum by early June this year and started to rally sharply. As a result, the August futures contract of the metal on the Multi Commodity Exchange (MCX) advanced and it is now hovering at ₹190. It gained about 17 per cent in the last two months.

But the contract has been moving in a sideways trend between ₹186.5 and ₹192 for the past one week. Even though the overall trend is pointing upwards, the contract should breach ₹192 to extend the rally further. On the other hand, a prolonged consolidation at current levels will open up space for the bears. Whatsoever, the outlook for the contract will remain positive at least until the price stays above the 21-day moving average (DMA) – now at ₹182. Since the price started to trace a sideways trend, the indicators has been hinting at a loss in the upside momentum. The daily relative strength index, though lies in the bullish region, has moderated a bit; the moving average convergence divergence on the daily chart is in an upward trajectory but has started to flatten.

 

If the contract regains traction and passes through the resistance at ₹192, it will most likely rally to the psychological level of ₹200, where it might witness profit-booking. A breakout of that level can accelerate the momentum possibly lifting the price to ₹210. However, if the contract weakens and falls below ₹186.5, the nearest support is at ₹182. Subsequent support is at ₹175.

On the global front, the three-month rolling forward contract of zinc on London Metal Exchange (LME) is moving up with considerable strength. Henceforth, the contract is likely to gain and rally above $2,400 in the upcoming sessions.

Trading strategy:

Though the major trend is bullish, the MCX-Zinc futures is currently facing a hurdle at ₹192. So, traders can buy the contract with stop-loss at ₹185, if it rallies past ₹192.

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Published on August 14, 2020
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