Portfolio

MCX-Zinc tests key support level

Akhil Nallamuthu BL Research Bureau | Updated on September 19, 2019 Published on September 20, 2019

The September expiry contract of Zinc futures on the MCX witnessed volatility in the past week as it tested both ends of the range ₹183.3-189.25, within which it has been moving for the past three weeks. The contract opened at ₹187.3 a kg for the week, and after marking a high of ₹189.25, ie, the upper boundary of the range, it declined 3.2 per cent to ₹183.3 — the lower boundary.

In case the prevailing bearish price swing extends, and the contract breaks below ₹183 levels, it will find support at ₹182. Below this level, there is considerable support at ₹180.7 — the current month low. On the other hand, if the price bounces taking support at the range bottom, it could rally towards ₹185.75, beyond which it will face strong resistance at ₹189 levels.

The three-month rolling forward contract of Zinc on the LME faced stiff resistance at $2,400 and the contract started depreciating from that level. Currently trading at $2,320, it declined below the 21-DMA and is approaching a support in the band between $2,295 and $2,300. However, a break below these levels can intensify the sell-off and drag the price to $2,230 in the days to come. Alternatively, a bounce from the support band may result in the price appreciating to $2,355.

Trading strategy

The recent downtrend in global prices may weigh on the MCX-Zinc futures contract, pushing it to break below the crucial support at ₹183. Also, there’s an equal probability that it might bounce from the current level since it is the range bottom and may become a support level.

Hence, it is advisable to wait until a decisive break of that support is observed. In such a case, one can initiate short positions with stop-loss above ₹186 where the price might potentially depreciate to ₹182 and even to ₹180.7 in the near term.

Published on September 20, 2019
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