Commodity Calls

Near-term view bearish for MCX Zinc

Gurumurthy K BL Research Bureau | Updated on August 14, 2018 Published on August 14, 2018

The zinc futures contract on the Multi Commodity Exchange (MCX) spiked to a high of ₹185.1 per kg during last week but failed to sustain those levels. It has tumbled 6 per cent and currently trades at ₹173.5 per kg.

The contract was stuck inside this sideways range for about three weeks. The sharp fall signals the break of the ₹174-₹182 sideways range on the downside. The bias has also turned bearish as the fall in the past week has confirmed the breakthrough of a triangle pattern formed from the beginning of July. This is a continuation pattern and it indicates that the downtrend that has been in place since June is likely to resume.

Cluster of resistances poised in the band between ₹177-₹182 is likely to cap the upside in the short term. As long as the contract trades below ₹177, a fall to ₹164 or ₹163 is likely over the short term. A break below ₹163 can take it further lower to ₹160. The region between ₹163 and ₹160 is a crucial support zone. The price action around this support zone will need a close watch.

The bearish outlook will get negated only if the MCX-Zinc futures contract manages to breach ₹182 decisively. Such a break will increase the likelihood of the contract targeting to ₹190 thereafter. However, such a strong rally looks unlikely at the moment.

Trading strategy

Short-term traders can go short on a bounce at ₹176 and ₹179. Stop-loss can be placed at ₹184 for the target of ₹163. Revise the stop-loss lower to ₹172 as soon as the contract moves down to ₹169.

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

Published on August 14, 2018
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