Zinc futures: Go short on a rise at ₹287 and ₹290

Gurumurthy K |BL Research Bureau | Updated on: Jul 28, 2022

Since the broader trend is down, it is preferable to be on the sell side of the market rather than going long at current levels

The Zinc Futures contract on the Multi Commodity Exchange (MCX) is currently on a corrective bounce within its broad downtrend.

Charts show that the contract has been in a strong downtrend since April this year. The recent corrective rise has room to move up further from current levels.

The MCX Zinc futures contract is currently trading at ₹284 per tonne. Strong resistance is in the ₹287-₹290 region. The contract can rise in the next couple of days to test this resistance zone.

We expect the corrective rally to halt anywhere in the ₹287-₹290 region and reverse lower. The region around ₹290 is the neckline support level of the head and shoulder reversal pattern visible on the chart.

So, a break above ₹290 might not be easy and would need some strong trigger. So, a reversal will mark the beginning of a fresh leg of down move. That move can take the contract down to ₹280 initially.

A break below ₹280 will have the potential to drag the MCX Zinc futures contract lower to ₹270 and ₹260 over the next two-three weeks.

Trading strategy

Since the broader trend is down, it is preferable to be on the sell side of the market rather than going long at current levels.

Traders can wait for a rise and go short at ₹287 and accumulate shorts at ₹290. Keep the stop-loss at ₹294. Trail the stop-loss down to ₹285 as soon as the contract falls to ₹281. Move the stop-loss further down to ₹282 as soon as the contract touches ₹278. Exit the short positions at ₹276.

Published on July 28, 2022
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