Technical Analysis

MCX-Zinc breaches key resistance band

Akhil Nallamuthu BL Research Bureau | Updated on November 14, 2019 Published on November 14, 2019

The November futures contract of zinc in Multi Commodity Exchange of India (MCX) went past the resistance band between ₹191 and ₹192.7 (which now acts as a support band) last week and closed at ₹194.7. But after marking an intraweek high at ₹196.25, the contract softened and is trading at around ₹193. The 21-day moving average has crossed over the 50-day moving average indicating a potential reversal in the medium-term trend to bullish. The moving average convergence divergence indicator continues to show strength and the daily relative strength index too corroborates the bullish price action. But the moderation in price that the contract is undergoing might get extended to the earlier mentioned support band. Notably, until the price stays above those levels, the short-term outlook for the commodity is positive.

If the contract attracts buying interest on the price correction and the uptrend resumes, it has the potential to appreciate to ₹200 in the near term. On the other hand, if the correction results in price slipping below the support band, it could possibly trigger substantial sell-off dragging the price to ₹186.7. Below that level, the support is at ₹183.7.

 

 

On the global front, the three-month rolling forward contract of zinc in London Metal Exchange (LME) have broken below the support at $2,460 and is currently trading at $2,422. Thus, the contract has moved below the 21-day moving average. The contract has a support at $2,400 where the 50-day moving average coincides, making it a significant level. Support below $2,400 is at $2,330. Alternatively, if the contract bounces off from the support and appreciates, the resistances on the upside lies at $2,460 and $2,500.

Trade strategy:

Even though the price of November futures contract in MCX is moderating, but it is trading above the important support band. Also, the corrective rally in LME zinc price is nearing a support. Hence, traders can take a bullish view and initiate long positions with a tight stop-loss.

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Published on November 14, 2019
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