Portfolio

MCX-Zinc could witness further appreciation

| Updated on October 18, 2019 Published on October 18, 2019

Zinc has been on a recovery phase since the beginning of the past week. The October futures contract took support at ₹180 and recorded an intra-week high of ₹187.9 on Tuesday. However, the contract is still below a critical resistance at ₹191. Notably, the contract has moved above the 21-day moving average providing some hope for the bulls.

One can observe a bullish divergence on the daily relative strength index and in the moving average convergence divergence indicator. These factors could play out in favour of the commodity and could result in the medium-term trend turning bullish.

If the contract attracts buying interest, it could rise to ₹191 levels in the coming days. A close above that level on daily basis would confirm the trend reversal which could potentially result in the price appreciating to ₹200. On the other hand, if the contract declines from the current level, it will find support at ₹180 levels. Below ₹180, the price can depreciate to ₹177.3 below which the support is at ₹174.

Looking at the global prices, the three-month rolling forward contract of zinc on the LME has broken a key resistance at $2,400, thereby making a higher high. Also, the 21-DMA has crossed the 50-DMA on the upside, making the case stronger for the bulls. Thus, the contract will, most likely, appreciate to $2,500, which is a significant resistance. Above that level, it could even appreciate to $2,574 over the medium term.

Zinc October futures in the domestic market is still trading between two key levels of ₹180 and ₹191. But an uptick in the global price, as indicated by the forward prices on the LME, could work in favour of the metal. The positive sentiment is expected to get transmitted to the MCX-Zinc price as well. Traders can go long on dips by placing a stop-loss at ₹179.

Published on October 18, 2019
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