The continuous contract of zinc futures on the MCX (Multi Commodity Exchange) is on a fall ever since it made a high of ₹383 in early April. By hitting a low of ₹291 last week, it depreciated by 24 per cent. Nevertheless, it recovered from that level and closed at ₹300.8 on Tuesday. As estimated, a bounce has been witnessed from the ₹292-level as it enjoyed a considerable support.
Although the overall bias is bearish, we expect the recovery to extend. It can rally to ₹318, a resistance level. Subsequent resistance is at ₹322. A breach of this level can take the contract to ₹336.
On the contrary, if the support at ₹292 is invalidated, the contract might see a swift fall to ₹275.
But broadly, we expect the contract to at least rally to ₹322 before witnessing further fall.
So, given the prevailing conditions, one can risk by taking counter trend positions. That is, go long at the current level of ₹298 and accumulate more if it retests ₹292. Stop-loss can be placed at ₹284. When the contract surpasses ₹316, tighten the stop-loss to ₹306. Liquidate all the shorts when the contract touches ₹322.
Note that this is a counter-trend trade and so, this is not for trend followers.