Zinc futures contract on the Multi Commodity Exchange (MCX) has been falling for the past four months. However, currently trading at around ₹226, the contract is at a strong base – the price band of ₹225-230 is a solid support.
Nonetheless, the support alone does not confirm a trend reversal. Probably a rally past ₹240 can be taken as a sign of bullish reversal. In a case where the prices go above ₹240, the contract might rally towards the resistance at ₹262. If this level is taken out, the medium-term could also become bullish, potentially leading to an upswing to ₹300 or even to ₹325.
As it stands, there are no bullish confirmations yet. But there is a sign of weakening sell trend – the RSI and the MACD on the daily chart have started forming bullish divergences. However, as mentioned above, a rally over and above the resistance at ₹240 is needed as validation for traders before going long.
On the other hand, if the contract slips below the support at ₹225, we might see a quick decline to ₹200.
We suggest traders to stay on the fence for now. Initiate fresh longs when the zinc futures break out of ₹240. Target and stop-loss can be at ₹260 and at ₹230 respectively.