Technical Analysis

MCX-Zinc extends the sideways trend

Akhil Nallamuthu BL Research Bureau | Updated on April 02, 2020 Published on April 02, 2020

After trending down for a little over two months, the price of April futures contract of Zinc Mini on the MCX has been moving in a sideways trend for the past two weeks. It has been oscillating between ₹140 and ₹150. But the price remains below the 21-day and 50-DMAs, giving the contract a bearish bias. Notably, the 21-DMA and 38.2 per cent Fibonacci retracement level of the previous downswing coincides at ₹150, making it a strong hindrance.

As the contract consolidates, the daily Relative Strength Index (RSI) has inched up from the oversold levels, but remains below the mid-point level of 50. On the other hand, the Moving Average Convergence Divergence (MACD) indicator on the daily chart is showing signs of momentum turning in favour of bulls, though it still remains in bearish zone.

Even though the major trend is downward, the contract price is now trading between two key levels at ₹140 and ₹150. So, the next leg of trend cannot be confirmed until either of these levels are breached. If the contract breaks out of the resistance at ₹150, it will most likely rally to ₹160 — its 50-DMA. Alternatively, if the contract breaks below the support at ₹140, the price could retest ₹126 — its prior low.

On the global front, the three-month rolling forward contract of Zinc on the London Metal Exchange, similar to the contract on the MCX, has been consolidating during past two weeks. If the contract breaches $1,800 again, it might witness another leg of downtrend.

Trading strategy

Because the major trend on the MCX and LME are in downward, one can take bearish view. But since the contract has a support at ₹140 and there are indications of bears losing traction, traders can short the contract with stop-loss at ₹150 if it slips below ₹140.

Published on April 02, 2020

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