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Since taking support at ₹200 per kg in mid-December 2017, the Zinc futures contract on the Multi Commodity Exchange (MCX) has been in a short-term uptrend.
However, the contract appears to have met with a resistance at ₹220 last week and began to move sideways testing this barrier.
On Tuesday, the contract started the session in red, opening at ₹219.40 and continues to hover at this level.
The daily relative strength index and price rate of change indicators are showing negative divergence implying that a trend reversal is on the cards. An emphatic decline below the immediate key support level of ₹215 will confirm the trend reversal.
In that scenario, the contract can decline to ₹212 and then to ₹210 in the short-term. Further slump below ₹210 has the potential to drag the contract down to ₹207 and ₹205 levels over the medium-term.
On the other hand, an emphatic upward breakthrough of the immediate resistance level of ₹220 will negate the downward reversal and take the contract higher to ₹225 and then to ₹228 levels in the medium-term. As long as the contract trades in the band between ₹215 and ₹220, traders with a short-term perspective should tread with caution.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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