The continuous futures contract of zinc on the Multi Commodity Exchange (MCX) has been witnessing considerable amount of volatility since the beginning of 2021. Nevertheless, it has managed to stay positive and produced a year-to-date gain of 12 per cent. The latest leg of rally that began in early April from about ₹218 lost some momentum and as a result, the futures entered a consolidation phase. It was oscillating between ₹230 and ₹238 for the past three weeks.

But this week has been good as May futures have broken out of the resistance at ₹238 and therefore, the contract seemed to be regaining traction. The bullish bias is substantiated by the relative strength index (RSI) as it shows fresh uptick and lies in the positive territory. The moving average convergence divergence indicator on the daily chart, which has been inching downwards, is now turning its trajectory up. Also, the bounce is off the 21-day moving average (DMA). Moreover, the average directional index, which shows the strength of trend, signals a strong uptrend.

Taking above factors into account, traders can initiate fresh long positions on declines with stop-loss at ₹233. On the upside, the futures contract has the potential to move up to ₹250, an important level. A breach of this level can intensify the rally where the contract could touch ₹260. To manage risk better, traders who opt to hold longs above ₹250 can consider shifting the stop-loss upwards to ₹240 once the contract goes beyond ₹250.

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