Commodity Calls

MCX-Zinc: Buy on declines

Akhil Nallamuthu BL Research Bureau | Updated on July 09, 2020 Published on July 10, 2020

 

MCX-Zinc (₹169)

The July futures contract of Zinc on Multi Commodity Exchange (MCX), which has been oscillating in a sideways trend in the band between ₹159 and ₹166 since early June, broke out of the upper boundary of the range on Wednesday. This has shifted the near-term trend bullish.

Following the recent rally that led to the break out, the daily Relative Strength Index (RSI) is showing a fresh uptick and has crossed over the midpoint level of 50. The Moving Average Convergence Divergence (MACD) indicator on the daily chart, which remained flat for the past couple of weeks, has turned the trajectory upwards. Also, it stays in the bullish region. Moreover, the price is well above the 21-day moving average (DMA), indicating a good positive momentum.

Since the contract has broken out of the range, it is likely to add more gains during the upcoming session. While ₹175 can be the immediate resistance, a move above that level can lift the contract to ₹180. On the other hand, if the contract is unable to sustain and descends from current levels, the 21-DMA at ₹163 can act as a support. Below that level is the crucial support of ₹159, where the 50-DMA coincides. If this level is breached, the trend could turn bearish.

 

On the global front, the three-month rolling forward contract of zinc on London Metal Exchange (LME), which was consolidating in a narrow range, has rallied above its previous high of $2,076 confirming a break out. Thus, the contract looks set to go up further.

Trade strategy:

The contract on MCX has moved out of the range and the near-term trend looks bullish. Also, the global price trend, as indicated by the LME contract, has made fresh highs breaking out of the resistance. Hence, the likelihood of a rally is high and so traders can buy MCX-Zinc on declines with stop-loss at ₹159.

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Published on July 10, 2020
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