Commodity Calls

MCX-Zinc is range-bound with a bullish bias

Gurumurthy K, BL Research Bureau | Updated on March 12, 2019 Published on March 12, 2019

The Zinc futures contract on the Multi Commodity Exchange of India (MCX) fell in the past week as expected to test the ₹191-₹190 per kg support zone. The contract made a low of ₹189.15 on Friday and has bounced from there. It is currently trading at ₹195 per kg.

The near-term outlook is mixed. There is an equal chance of the contract moving higher to ₹200-₹202 or even falling to ₹190-₹188 again from current levels. So, traders can stay out of the market until a clear trend emerges.

However, the indicators on the charts are positive signalling that the downside could be limited. Cluster of moving average supports are at ₹187 which can arrest the fall even if the contract declines below ₹190. Also, such dips to ₹190-187 band will be a good opportunity to buy the contract from a medium-term perspective.

On the other hand, a strong break and a decisive close above ₹203 is needed for the MCX-Zinc contract to gain fresh momentum. Such a break will see the contract targeting ₹215 and ₹220 over the medium term.

Broadly, the MCX-Zinc futures contract can trade sideways between ₹187 and ₹203 before we seen an eventual rally targeting ₹215 and ₹220 in the coming weeks.

Trading strategy

Traders with a medium-term perspective can make use of dips and go long at ₹191 and ₹188. Stop-loss can be placed at ₹181 for the target of ₹213. Revise the stop-loss higher to ₹195 as soon as the contract moves upto ₹201.

Global trend

The Zinc (3-month rolling forward) contract on the London Metal Exchange (LME) has been facing strong resistance at $2,800 per tonne. It is currently trading at $2,730. A fall to $2,630 or $2,600 is possible as long as it trades below $2,800.

A strong break above $2,800 is needed to gain fresh momentum. The next target is $2,900.

Note: The recommendations are based on technical analysis and there is a risk of loss in trading.

Published on March 12, 2019
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