Commodity Analysis

MCX-Zinc hovers near a key support

Akhil Nallamuthu BL Research Bureau | Updated on November 21, 2019 Published on November 22, 2019

The price of zinc dwindled in the past week and this fall seems to have put an end to the recovery that began in October. Prior to that, it was in a major downtrend that extended from April to August, tumbling about 20 per cent as indicated by the spot price on the Multi Commodity Exchange of India.

The November futures contract of zinc in MCX slipped from its recent high of ₹196.25 to the current market price of ₹186.5, weakening by nearly 5 per cent. The price has dipped below both 21-DMA and 50-DMA giving the commodity a negative outlook. Also, the daily relative index has moved below the mid-point level of 50 and the moving average convergence divergence indicator has entered the negative territory, both indicating a bearish bias.

The contract is currently trading at a support and so the contract might witness some profit-booking resulting in a pull-back rally. Hence, only a daily close below ₹186.5 can be taken as a confirmation for further depreciation. Below that level there is a support in the band between ₹182 and ₹183.7. Alternatively, if the contract advances taking support at ₹186.5, it will face a stiff resistance at ₹191.

On the global front too, the three-month rolling forward contract of zinc on the London Metal Exchange has declined in the past week. Trading at $2,313, the contract has an immediate support at $2,286. A break below that level could drag the price to $2,200. However, if the contract rebounds, it will face hurdle at $2,400.

Trading strategy

Though MCX-Zinc and LME-Zinc indicate a strong short-term downtrend, both the contracts are trading near a support level. Hence, traders are recommended to wait for a decisive break of the support at ₹186.5 before initiating fresh short positions. So, sell MCX-Zinc November futures contract only below ₹186.5 with a tight stop-loss.

Published on November 22, 2019
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