The continuous zinc contract on the Multi Commodity Exchange (MCX), which declined in October, November last year, found support at ₹260 and started moving up. Although there were minor corrections, the overall direction remains to the upside. The contract broke out of ₹310 last week, opening the door for further rally.
Substantiating the upside, the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart are showing fresh uptick and both indicators lie in their respective bullish territory. Also, the cumulative open interest (OI) of zinc futures on the MCX went up to 2,006 contracts on Tuesday compared to 1,611 a week ago – a rally along with an increase in OI is an indication of long build-ups.
Therefore, a rally from the current levels is high, wherein the contract can touch ₹335. A breach of this level can lift it to ₹350. However, the contract might decline to ₹308 before rallying to ₹335. Also, until the price stays above ₹300, the near-term trend will be bullish.
Hence, consider buying zinc futures at the current level of ₹320 and accumulate longs when the price drops to ₹308. Place the initial stop-loss at ₹295. When it touches ₹335, revise the stop-loss upwards to ₹320. Exit the longs at ₹348.