The August futures contract of zinc Multi Commodity Exchange (MCX), which was trading sideways in the band between ₹186.5 and ₹192, broke out of the range last week. Following this, the contract rallied and made a fresh high of ₹198.9 on Wednesday. It has been in a considerable positive momentum since mid-June and the bulls are likely to push the price upwards.
Corroborating the positive bias, the moving average convergence divergence indicator on the daily chart has resumed moving up after staying flat during last week. The daily relative strength index, which is in the bullish zone, is showing a fresh uptick. So the indications are clearly in favour of the contract. Moreover, the price continues to form higher highs showing good bullish strength.
In the forthcoming sessions, the contract is likely to appreciate since the overall trend is bullish and has broken out of the range. While it can advance to ₹202 shortly, the contract can potentially rise to ₹210 in the near term. On the other hand, if the bulls give away and the price drops, ₹192 can be a support level. A breach of this level can drag the contract to ₹186, where the 21-day moving average (DMA) coincides. Notably, the contract can retain the upward bias until the price remains above the 21-DMA.
On the global front, the three-month rolling forward contract of zinc on London Metal Exchange (LME) moved past the previous high and it has gone past $2,400. The bull trend remains intact and it can move towards $2,500. The up-move can positively influence the contract in MCX.
Trading strategy:
On the back of the major uptrend, the contract on MCX breached the upper limit of the range i.e. ₹192 last week, opening more room on the upside. Globally, the metal seems to continue the rally as indicated by the contract on LME. Hence, traders can continue to be bullish and go long in declines with stop-loss at ₹186.
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