The continuous futures of zinc on the MCX (Multi Commodity Exchange) has been falling since the beginning of this month. The price action hints that the contract has resumed the downtrend after witnessing a rally, a corrective one, which resulted in zinc futures marking a high of ₹339.8 early this month. The contract is expected to drop further from here.

Currently trading at around ₹317, the price is likely to slip below the prior low of ₹301. Below this level, the contract is expected to depreciate to the price region of ₹286-292, which can be a support band.

Substantiating the bearish bias, the RSI and MACD on the daily chart lie in their respective bearish territory. Moreover, the price drop is accompanied by an increase in cumulative open interest (OI) of zinc futures on the MCX. That is, the cumulative OI increased to 1,305 contracts on Monday, compared to 1,105 contracts a week back. A price drop with increasing OI indicates a short build-up.

Therefore, traders can stay bearish on zinc futures. A week back, we recommended initiating fresh shorts at around ₹330, with stop-loss at ₹345. The revised stop-loss would be at ₹338, as the price is now below ₹322. Traders can retain the shorts. When the contract touches ₹300, liquidate half of the total shorts you hold and tighten the stop-loss to ₹315. Book the remaining shorts when the price falls to ₹292, as there could be a bounce-off the support band of ₹286-292.