The rebound from the support of ₹310 a couple of weeks back lifted the continuous futures of zinc on the Multi Commodity Exchange (MCX) to a high of ₹347.9 last Wednesday before closing that session at ₹345.6. Since then, it has been trading sideways and is currently hovering around ₹338.
As the overall trend is bullish, the contract has the potential to rally further. But since ₹350 is a hurdle, the zinc futures could see a minor correction, possibly towards ₹320, before scaling new heights. Above ₹350, there is a resistance at ₹375. A decisive breach of this level can result in a swift rally, possibly taking the price to ₹400 over the medium term. The bullish inclination will remain as long as the contract remains above the support band of ₹300-310.
A couple of weeks back, we suggested buying zinc futures at around ₹310 with initial stop-loss at ₹285, which was revised to ₹295 last week. Traders holding this position can retain their longs. For fresh trades, it is better to wait and buy at ₹320 as we expect a corrective decline towards this level before breaking out of ₹350. Stop-loss can be at ₹295.
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When the contract rallies to ₹350, book half of your holdings and modify the stop-loss to ₹320. Liquidate the remaining when price rallies to ₹375 since there might be some profit-booking at this level, which can drag down the price to some extent. Based on how the contract reacts to ₹375, we can work on fresh trading idea.