The September futures contract of Zinc in Multi Commodity Exchange of India opened with a muted note at ₹181.8 on Wednesday. But bulls gained control and the commodity contract rallied in the latter half of the previous session and closed at ₹187.3 with a solid gain of 3.3 per cent. On Thursday, it continued the positive momentum as it went up after opening at ₹186.5 and recorded an intra-day high at ₹189.25, trading near an important resistance at ₹190 level.

The daily Relative Strength Index (RSI) has crossed above the mid-point level of 50 with a visible bullish divergence. Hence, the contract seem to be attracting buyers and if it manages to break above the resistance at ₹190 level, the price may move up towards ₹192.9, where the upward movement could be resisted by 38 per cent Fibonacci retracement level of the previous downtrend that extended from May to August 2019. On the other hand, if the resistance manages to add selling pressure, the contract may decline to ₹185.7, below which, the support is seen at ₹182.7 levels.

Global trend

The futures contract of Zinc in London Metal Exchange was choppy in the recent weeks oscillating between $2,208 and $2,333 a tonne. The commodity had posted a considerable gain of 5 per cent on Wednesday closing at $2,326, above 21-day moving average indicating a possible reversal in trend, at least in the short-term. The contract will face an immediate resistance at $2,333, ie, the upper limit of the range, and beyond that the price will face a considerable resistance at $2,370 levels where 50-day moving average is poised.

Trading strategy

Gains backed with huge volumes imply strong buying interest and as a result the commodity may head northwards. If the contract goes past the crucial resistance at ₹190, the price will most likely move up towards ₹192.9. If the contract breaches that level, it can rally towards ₹195.60 in the coming days. Hence, traders can buy on dips with stop-loss at ₹185.

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