The June futures contract of Zinc on the Multi Commodity Exchange (MCX) declined last week after facing resistance at ₹165. However, the fall was arrested by the support band between ₹158 and ₹160. At ₹158 lies the 23.6 per cent Fibonacci retracement of the previous trend and at ₹160 lies the 21-DMA.
The contract, that stopped falling on the back of the support band, began consolidating around that price area. Thus, the price area between ₹158 and ₹160 is acting as a strong base and as long as the price remains above that level, the contract can be biased to upside. So, the recent moderation in price could be a retracement, which is a part of an uptrend.
Substantiating the bullish stance, the daily RSI is above the midpoint level of 50 and the MACD indicator on the daily chart is in the positive territory.
If the contract regains upward momentum and rises, it is likely to face a hurdle near ₹165, that is, the previous top. A breakout of that level can lift the price to ₹175. Subsequent resistance is at ₹178. On the other hand, if the contract is unable to sustain above ₹158 and breaches that level, it is likely to test the support at ₹153. A break below that level can invite more bears possibly resulting in a sharp sell-off.
On the global front, the three-month rolling forward contract of zinc on the London Metal Exchange (LME) quickly recovered after slipping below the support of $2,000. The contract can be bullish until it stays above that level.
Trading strategy
While the contract on the MCX has softened, the price stays above an important base. Also, the contract on the LME is hovering above the critical support. Hence, the likelihood of MCX-Zinc strengthening from current levels is high and so traders can buy the contract with stop-loss at ₹155.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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