The Zinc futures contract traded on the Multi Commodity Exchange (MCX) is under pressure. The sharp fall witnessed on Friday last week, on the back of a strong dollar, has extended on Monday also. It made a low of ₹263.35 per kg on Monday and has bounced back slightly from there. It is currently trading at ₹265.65 per kg. An important support is at ₹260. The chances seem high for the MCX Zinc contract to break below ₹260. This will increase the bearish momentum and push it down to ₹240-235 in the next couple of weeks.

If the contract manages to sustain above ₹260, an intermediate bounce to ₹265-270 is possible. A sustained rise past ₹270 is needed to avert the danger of breaking below ₹260. But that looks less likely as seen from the charts. The 21-day moving average (DMA) has gone below the 55-DMA. This is a negative signal, indicating that the upside will be capped, and more fall is on the cards.

Trading strategy

Traders can wait for the contract to break below ₹260 and then go short. Stop-loss can be kept at ₹267. Trail the stop-loss down to ₹254 as soon as the contract falls to ₹247. Move the stop-loss further down to ₹246 when the contract touches ₹241. Book profits at ₹238.

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