The Zinc futures contract on the Multi Commodity Exchange (MCX) witnessed a strong rally in the past week as expected. The contract has surged about 7 per cent over the last one week. This strong rally has taken the contract well above a key resistance zone of ₹173-₹174 per kg. This resistance zone had been capping the upside in the contract for a prolonged period of time since April.

The contract is currently trading at ₹176.35 per kg. The break above ₹174 also signals the reversal of the downtrend that was in place since February this year. If the contract manages to sustain above ₹174, it would confirm the reversal and will pave the way for further rally in the prices. Technically, the level of ₹174 may now act as a good support and dips to this level may find fresh buyers coming into the market.

Immediate resistance is at ₹177.35 – the 50 per cent Fibonacci retracement level. A break above it can take the contract higher to ₹182.35 – the 61.8 per cent Fibonacci retracement resistance. Inability to break above ₹182.35 can trigger an intermediate corrective fall to ₹177 or ₹175. But a strong break above ₹182.35 can take the contract to ₹185 or even higher levels thereafter.

Traders with a medium-term perspective can go long at current levels. Stop-loss can be placed at ₹172 for the target of ₹184. Revise the stop-loss higher to ₹178 as soon as the contract moves up to ₹180.

The bullish outlook will get negated if the contract declines decisively below ₹173. Such a fall will increase the possibility of the contract falling to ₹170 or even ₹165 levels once again.

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

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