Gurumurthy K The Zinc futures contract on the MCX moved higher as expected last week breaking above the resistance at ₹199 per kg. However, the contract has come-off after making a high of ₹201 per kg on Friday. The contract has declined over 2 per cent from the week’s high and is currently trading at ₹196 per kg.
The recent pullback move indicates that the contract is lacking fresh follow-through buyers above the psychological level of ₹200. This leaves the near-term outlook negative. Though the overall view remains bullish, a corrective fall is likely before the contract resumes its uptrend.
As such, as long as the contract trades below ₹200, a dip to ₹193 is possible in the near-term. A break below ₹193 will then increase the likelihood of the contract extending its downmove to ₹191 and ₹190. A further fall below ₹190 looks unlikely at the moment.
An upward reversal from ₹193 or the ₹191-190 support region will see the contract retesting ₹200 levels. The region between ₹202 and ₹203 is a crucial resistance. A strong break and a decisive close above ₹203 is needed for the MCX-Zinc contract to gain fresh momentum. Such a break will then pave way for a fresh rally targeting ₹210 over the medium-term.
Global trend
The Zinc (three-month forward) contract on the LME made a high of $2,804 per tonne on Monday and has come-off from there. It is currently trading at $2,751 per tonne. Immediate support is at $2,735. A break below it can drag the contract to $2,700 and $2,685.
On the other hand, if the LME-Zinc contract sustains above $2,735, a sideways move between $2,735 and $2,800 is possible. An eventual break above $2,800 can take it initially to $2,835. A further break above $2,835 will pave way for the medium-term target of $3,000.
(Note: The recommendations are based on technical analysis and there is a risk of loss in trading.)
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