The continuous future contract of zinc on the Multi Commodity Exchange (MCX) has been moving in range since early September. It has largely been held within the price band of ₹260-292.
Last week, the contract made an intraweek low of ₹263.3 before recovering to the current level of ₹270. Meaning, the contract has bounced off the support band of ₹260-264.
Since the zinc futures have rebounded from the range bottom, it is highly likely that it will travel toward the range top from here. We expect the contract to touch ₹290 in two or three weeks.
A breakout of ₹292 can turn the outlook positive for the contract. But a breakout is not a given as we have to wait and see.
On the other hand, if the price drops from here and slips below ₹260, the outlook will turn negative and is likely to drop towards the support band of ₹242-245.
Although there has been no definite trend in zinc futures of late, the price is now near the range bottom which is strong support. Consequently, the risk-reward ratio looks good for fresh long positions.
So, we suggest going long on zinc futures now at ₹270 and adding more if the price dips to ₹262 and placing a stop-loss at ₹257 at first.
When the contract moves above ₹280, shift the stop-loss up to ₹265. Liquidate all the longs at ₹290.