The Zinc futures contract on the Multi Commodity Exchange (MCX) rallied in the past week breaking above the key resistance level of ₹193.5 per kg in line with expectations. The contract surged over 6 per cent intra-week to test the key resistance level of ₹203 as expected. The contract made a high of ₹202.7 on Monday and has come-off slightly from there. It is currently trading at ₹200 per kg.

The key resistance at ₹203 is holding as of now. Since the contract has risen sharply in a very short span of time, a corrective fall is more likely in the coming days. As long as the contract trades below ₹203, a pull-back move to ₹195 and ₹193 is possible in the coming days. However, the broader view will continue to remain bullish. The indicators on the charts are also positive. The 21-day moving average has crossed over the 55-day moving average. It is now on the verge of crossing over the 100-day moving average. This is a positive signal indicating that the downside could be limited.

As such an eventual break above ₹203 will see the MCX-Zinc futures contract rallying towards ₹215 over the medium term.

Trading strategy

Traders with a medium-term perspective can go long on dips at ₹195 and ₹193. Stop-loss can be placed at ₹183 for the target of ₹212. Revise the stop-loss higher to ₹202 as soon as the contract moves up to ₹208.

Global trend

The Zinc (3-month forward) contract on the London Metal Exchange (LME) has risen, breaking above the key resistance level of $2,730 per tonne in the past week. This level of $2,730 will now act as a good support. Next resistance is at $2,860 which is likely to be tested in the near term. A strong break above $2,860 will then pave way for the next targets of $2,900 and $2,940.

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

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