The May futures contract of Zinc on the MCX was in a downtrend since the beginning of the year. It registered a low of ₹131.95 in the last month, from where the price began to rise. As the contract advanced, it moved above the 21-day moving average (DMA) during the first week of the current month. But it was unable to rally above the 50-DMA which capped the gain at ₹156.6. Notably, ₹156.6 along with the resistance at ₹160 has formed a resistance band.

The contract is currently trading near ₹150 and the year-to-date loss stands at about 18 per cent.

The contract has been in a recovery phase since the beginning of the month. But there are signs of bulls losing traction. The daily RSI is showing a fresh downtick and lies below the midpoint level of 50 whereas the Moving Average Convergence Divergence (MACD) indicator on the daily chart remains in the negative zone hinting that the uptrend is losing momentum.

On the downside, ₹145.7 can act as a support while the contract has a resistance band between ₹156.6 and ₹160 on the upside. So, unless the contract either breaches ₹145.7 or ₹160, the next leg of trend cannot be confirmed. While below ₹145.7, there is a support at ₹140, the next significant hindrance will be at ₹170 above ₹160 levels.

On the global front, the three-month rolling forward contract of Zinc on the LME moderated to $1,900 from $1,950 on Tuesday. The contract, which has been gradually gaining over the past month should decisively breach $1,950 to extend the uptrend.

Trading strategy

Though MCX-Zinc contract is trading within two key levels, there are indications of the contract inclining towards bear zone. Also, the overall trend of the metal is negative. But the contract has support at ₹145.7. Hence, traders can sell the contract with a stop-loss at ₹152 if it breaks below ₹145.7.

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