Zinc futures (February contract) on the Multi Commodity Exchange (MCX) have been witnessing a sharp fall in price since the beginning of this month. It faced a barrier at ₹230 against which the downtrend began.
But after marking a low of ₹204.65 early this week, zinc futures have largely been moving sideways. Since ₹204 is a support, there is a chance for a corrective rise from the current level. Such a move can lift zinc futures to ₹218 – its 20-day moving average.
- Also read: MCX-Zinc: Bearish. Go short
After touching ₹218, the contract is likely to establish the next leg of downtrend. But rather than a corrective rise, if zinc futures falls from here and breaches the support at ₹204, we are likely to see a decline to ₹180.
Trade strategy
High risk appetite traders can buy zinc futures now at ₹209 with a stop-loss at ₹203. When the contract touches ₹215, tighten the stop-loss to ₹208. Exit at ₹218.
In case the stop-loss of the above long trade is hit, the support at ₹204 would have been broken. In such a case, go short with stop-loss at ₹210. Book profits at ₹180. As a risk management measure, once the price dips below ₹190 after this trade is initiated, alter the stop-loss to ₹196.