The zinc futures on the Multi Commodity Exchange (MCX) closed above the key resistance band of ₹286-292 last week. This has turned the outlook positive for the contract. It is currently trading around the 50-week moving average of ₹300. However, this is less likely to tame the bull and turn the trend negative. Probably, there might be a corrective decline off this level to ₹290.
The overall bull trend is substantiated by the fund flows in zinc futures on the MCX. Besides the price rally, there has been an increase in the cumulative Open Interest (OI) which stood at 3,260 contracts on Monday (January 23) compared with 2,181 contracts on January 6. This indicates long build-up.
So, eventually, the contract will go past ₹300-mark and touch ₹325 in the near future.
Trade strategy
Initiate longs at the current level of ₹300. Add more longs if the price dips to ₹290. Place stop-loss at ₹278 at first and move it up to ₹295 when the contract rallies past ₹315. When the contract rises to ₹320, tighten the stop-loss further to ₹310. Exit the longs at ₹325.