Commodity Calls

MCX-Zinc is stuck in a narrow range

Gurumurthy K BL Research Bureau | Updated on March 27, 2018 Published on March 27, 2018

The zinc futures contract on the Multi Commodity Exchange (MCX) has been oscillating near ₹210 per kg for more than two weeks. The contract is stuck in a narrow range between ₹207 and ₹215. Within this range, the contract is currently trading at ₹213.5 per kg. The immediate outlook is unclear. A breakout of this range will decide the next trend.

Mixed signals

Indicators on the charts are giving mixed signals. The contract is managing to sustain above a key trend-line support level of ₹207. This leaves the possibility of the contract reversing higher in the coming days. On the other hand, the 21-day moving average is on the verge of crossing below the 100-day moving average. This is a bearish signal indicating that the downtrend that has been in place since late February could resume going forward. So, traders can stay on the sidelines now and wait for the contract to break either above ₹216 or below ₹207 to get a clear cue on the next trend.

If the contract breaks below ₹207, it can fall to ₹204 initially. Further break below ₹204 can drag it to ₹199. On the other hand, if the MCX-Zinc futures contract manages to breach ₹216 decisively, it can gain fresh momentum. Such a break will take the contract higher to ₹220 initially. Further break above ₹220 will then increase the likelihood of the contract extending its upmove towards ₹230 or even higher levels.

Trading strategy

High-risk appetite traders with a medium-term perspective can go long on a break above ₹216. Stop-loss can be placed at ₹210 for the target of ₹228. Revise the stop-loss higher to ₹218 as soon as the contract moves up to ₹220.

Published on March 27, 2018

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