The May futures contract of Zinc on the MCX has been in a downtrend since the beginning of the year. But it recovered after making a low of ₹131.9 in mid-March. Currently trading near ₹154, the contract is trading lower by about 15 per cent for the year. Notably, ₹154 is a hurdle, which coincides with the 38.2 per cent Fibonacci retracement level of the previous trend.

The recent price action shows that ₹145 has been acting as a support. So, despite the major downtrend, the contract has good chance to establish an uptrend until it remains above ₹145.

The daily Relative Strength Index (RSI) is showing a fresh uptick and has moved above the midpoint level of 50. Also, the Moving Average Convergence Divergence (MACD) indicator on the daily chart is in an upward trajectory and is about to enter the positive territory. Moreover, the 21-day moving average (DMA) is attempting to cross over the 50-DMA — an indication of a potential change in the medium-term trend to turning bullish.

While ₹154 can be a resistance, a daily close above that level can lift the contract. On the upside, the nearest hurdle above ₹154 can be spotted at ₹160. A breakout of that level can lift the contract to ₹168 — its 61.8 per cent Fibonacci retracement level. But if the contract begins to descend, it can find support at ₹150. Below that level, it can decline to ₹145.

On the global front, the three-month rolling forward contract of Zinc on the London Metal Exchange (LME) is testing the resistance at $1,950. A breakout of that level can result in an uptrend.

Trading strategy

The MCX-Zinc contract, though in a major downtrend, has formed a considerable base at ₹145. But considering that ₹154 is a resistance, traders can initiate fresh long positions if the price decisively breaks out of that level. Stop-loss can be at ₹145.

Note: The recommendations are based on technical analysis. There is a risk of loss in trading.

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