Zinc prices have declined over the last week in line with our expectations. The Zinc Futures (December) contract on the Multi Commodity Exchange fell from around ₹274 and made a low of ₹263.15 per kg. We had expected a fall to ₹265-₹263. The contract is attempting to bounce now. It is currently trading at ₹269.20 per kg.
Since the December contract will expire on Friday and the volumes have become thin, we now shift the focus to the January contract. The MCX Zinc (January) Futures contract is currently trading at ₹270.3 per kg. It has strong resistance at ₹271.2 and ₹273.20.
The MCX Zinc contract will have to breach ₹273.2 to gain bullish momentum. Such a break can take it up to ₹280 initially. A further break above ₹280 will then pave way for a fresh rise to ₹295-₹300 over the medium-term.
If the MCX Zinc contract fails to breach ₹273.2 and reverses lower again, it can continue to remain under pressure. In that case, the contract will remain vulnerable for a fall to ₹258 going forward.
Since the next direction of move will depend on whether the contract breaks above ₹273.2 or not, we suggest traders stay on the side-lines for now. Watch the price action around ₹273.2 closely before taking a trade call.