The support at ₹205/kg for the zinc futures contract on the Multi Commodity Exchange (MCX) continues to hold well for the second consecutive week. The contract hit a low of ₹204.5 per kg on November 15 and has been stuck in a narrow range above ₹205 since then. Whether the contract manages to sustain above ₹205 or not will decide the direction of the next move in the coming days. Traders can stay out of the market until the next trend becomes clear.
A strong break and a decisive daily close below ₹205 will be the first sign of weakness in the contract. Such a break will bring fresh selling pressure. In such a scenario, the contract can fall to ₹198 in the coming days.
Short-term traders with a high risk appetite can go short on a break below ₹205 at ₹204. Stop-loss can be placed at ₹206 for a target of ₹200. Revise the stop-loss lower to ₹203 as soon as the contract moves down to ₹202.5. Move the stop-loss lower to ₹202 as soon as the contract moves down to ₹201.
On the other hand, if the contract manages to sustain above ₹205, it can move up in the near term. Immediate resistance is in the ₹209-210 region. A strong break above ₹210 will ease the downside pressure and take the contract higher to ₹213 or ₹215.
As long as the contract remains above ₹205, a range-bound move between ₹205 and ₹215 is seen for some time. A breakout on either side of ₹205 or ₹215 will then determine the next leg of move for the contract.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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