The May futures contract of Zinc on the MCX, despite rallying, failed to gain beyond ₹157 last week. Unable to extend the rally, the contract started to soften and is currently trading at ₹151.3.

The price action during the last month essentially shows that the contract is oscillating between ₹145 and ₹157. Also, ₹160 is a considerable resistance, which coincides with the 50 per cent Fibonacci retracement level of the previous downtrend. Thus, on the upside, the price area between ₹157 and ₹160 can be a resistance band.

On the back of the recent sideways trend, the 21- and 50-DMAs have converged towards each other at around ₹151. The daily RSI, which remains flat, is fluctuating around the midpoint level of 50. The Moving Average Convergence Divergence (MACD) indicator on the daily chart is hovering around the neutral region. Thus, both the indicators do not signal a definite trend.

If the bulls gain traction and take the contract price beyond the resistance at ₹160, the immediate hurdle will be at ₹170. A breakout of that level can lift the contract to ₹175. On the other hand, if the contract weakens and breaches the support at ₹145, it will most likely decline to ₹140. Support below that level is at ₹130.

On the global front, the three-month rolling forward contract of zinc on the London Metal Exchange (LME) has been exhibiting bullish bias since the beginning of the month. In fact, the contract briefly traded above the critical level of $2,000 and is currently trading at $1,980. As long as the contract remains above $1,950, there is high likelihood of a rally.

Trading strategy

Though globally the price of zinc seems to be gaining gradually, there is a lack of trend in MCX-Zinc. Moreover, ₹160 is a critical resistance. Hence, traders can buy the contract if it advances above ₹160. Place stop-loss at ₹150.

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

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