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The first two months of 2021 have been very volatile for the continuous futures contract of zinc on the Multi Commodity Exchange (MCX).
While it fell during most part of January, the contract managed to rally to mark a high of ₹241. However, the contract again fell but entered a consolidation phase in March and it was oscillating in the price range of ₹213 and ₹220.
During early April, the contract managed to break out of the resistance at ₹220 and from then on, it has been gradually appreciating. But after reaching the prior high of ₹241, it lost steam and was largely moving in a sideways trend.
The volume declined and the consolidation range was a bit broader i.e., between ₹228 and ₹243. However, last week, the contract started to gain traction and rallied past the hurdle at ₹243 and marked a high of ₹247.
Although the contract has moderated in the last couple of sessions, it is likely to be a retest of the resistance-turned-support level of ₹243 and the overall direction of the trend is northwards.
Substantiating the bullish bias, the moving average convergence divergence (MACD) on the daily chart is showing fresh upward momentum and the average directional index (ADX) indicates that the bulls are stronger.
Also, the 21-day moving average currently coincides at ₹243, making it a strong support. Considering these factors, one can be bullish on zinc and buy August expiry futures with stop-loss at ₹240 and look for a target of ₹252.
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