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MCX-Zinc (₹174)
The July futures contract of Zinc on Multi Commodity Exchange (MCX) rallied last week after breaking out of the consolidation range between ₹159 and ₹166. On Monday, it marked a high of ₹177.5 before moderating to the current market price of ₹174. The price action is inclined to uptrend, and the contract is likely to extend the rally.
Corroborating the bullish bias, the daily relative strength index has been rising along with the contract and stays above the midpoint level of 50. The moving average convergence divergence indicator on the daily chart remains in the positive territory and is tracing an upward trajectory. Also, the price is well above the 21-day moving average (DMA), indicating considerable upward momentum; and the contract appears to have formed a base at ₹172.
On the back of the prevailing bull trend, the contract is likely to move past the prior high of ₹177.5; above that level, ₹180 can be a hurdle. A breakout of ₹180 can take the contract to ₹185. On the other hand, if the contract declines and breaks below ₹172, it might depreciate to ₹166, where 21-DMA coincides. Below that level, the trend could turn bearish, and the sell-off could intensify where the contract might drop to ₹159.
On the global front, the three-month rolling forward contract of zinc on London Metal Exchange (LME) has been rising after breaking out of the resistance at $2,075. It also crossed over the resistance at $2,200, and the rally looks sustainable. As the contract moves up from the current level, it can even lift the contract on MCX.
Trade strategy:
The contract on MCX has been rallying strongly since the beginning of the month, and it can remain bullish until the price remains above ₹166. Also, globally the trend is positive. So, traders can initiate fresh long positions in MCX-Zinc on declines with stop-loss at ₹166.
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