Zinc futures on the Multi Commodity Exchange (MCX) rallied last week and made higher highs. It broke out of the resistance at ₹225 and hit an 11-month high of ₹236.4 on Monday.
The contract has broken out of the ₹205-230 range within which it has been oscillating since May last year. This fresh breakout has increased the odds of a rally from the current level.
The nearest notable barrier is at ₹252 and the subsequent hurdle is at ₹260. A breach of ₹260 can turn the medium-term trend bullish, where zinc futures can rise to ₹300.
That said, there is a chance for zinc futures to dip to the price region of ₹220-224, before witnessing the next upswing. But note that a fall below ₹220 can turn the outlook bearish.
Trade strategy
Stay on the fence for now and go long when zinc futures dip to ₹224. Place the initial stop-loss at ₹215.
When the contract rallies past ₹240, raise the stop-loss to ₹230. Further tighten the stop-loss to ₹238 when the price touches ₹245. Book profits at ₹250.