The continuous contract of zinc futures on the Multi Commodity Exchange (MCX) witnessed a downtrend last October and November. During this period, the contract declined from the high of ₹326.8 to ₹260. While the contract started to recover in early December and rallied to ₹292 in the final week, it lost momentum and entered a sideways trend.
For the past month, the contract oscillated within the tight range of ₹283 - ₹292. On Wednesday, it moved past the upper limit of the range and closed at ₹294.3, turning the outlook positive. The relative strength index (RSI) and the average directional index (ADX) show a fresh uptick on the daily chart. Also, the price is above both 21- and 50-day moving averages, hinting at bullish bias.
Given the above factors, one can consider initiating fresh longs at current levels and dip to ₹288 with stop-loss at ₹282. On the upside, the contract will likely cross over ₹300-mark and rally to ₹310 in the near term. A breach of this level can take the contract to ₹325. So, once the price goes above ₹310, revise the stop-loss to ₹295. Fully exit the longs at ₹325.
We had recommended fresh longs before a month with an initial stop-loss at ₹260. It was then advised to tighten to ₹282 and exit longs at ₹300. Considering the prevailing price, one can hold the longs and look for the target of ₹325 instead of ₹300. Adjust the stop-loss as mentioned above.