Commodity Calls

MCX-Zinc continues to tread lower

Akhil Nallamuthu BL Research Bureau | Updated on February 06, 2020 Published on February 07, 2020

The spot price of Zinc on the Multi Commodity Exchange of India (MCX) continues to witness downward pressure. The major trend remains bearish and further depreciation from current level looks highly likely.

The February mini futures contract of Zinc on the MCX continued its downtrend last week and currently stays below both 21- and 50-DMAs. The contract has slipped below an important level of ₹175. Hence, the outlook remains negative and for the commodity to reverse the trend, it should decisively break out of ₹180.

The RSI and the MACD indicator on the daily chart corroborates the bearish view. While the RSI is below the mid-point level of 50, the MACD has further extended into the negative region.

On the back of the major downtrend, the contract can be expected to decline to ₹165. Below that level, it can potentially depreciate to ₹160. On the other hand, if the contract manages to reverse the trend, an immediate resistance can be spotted at ₹175. If that level is taken out, the contract can rally towards the next resistance in the band between ₹178 and ₹180.

On the global front, the three-month rolling forward contract of Zinc on the LME broke below the critical level of $2,200 last week. It registered a new multi-year low of $2,142 on Monday. It has come off the low and currently trades around $2,200. But the price action on the daily chart indicates that the contract is struggling to move past that level; until the price stays below it, the metal will be subject to considerable selling pressure.


Trading strategy

The futures contract on the MCX continues to tread lower whereas the forward contract on the LME has breached an important support. These factors suggest further decline in price. Hence, traders can initiate fresh short positions in MCX-Zinc mini contracts on rallies. Place stop-loss at ₹178, where 21-day moving average coincides.

Published on February 07, 2020
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