Technical Analysis

MCX-Zinc in a consolidation phase

Akhil Nallamuthu BL Research Bureau | Updated on March 26, 2020 Published on March 26, 2020

The price of zinc has been in a downtrend for the past two months. On the back of it, the April futures contract of Zinc Mini on the MCX breached a key support of ₹150 in the past week. Following this, the contract fell sharply and registered a new low of ₹125.8 last Thursday. The contract then recovered and is currently trading near ₹143 as it failed to extend the rally past ₹150. The price action on the daily chart shows that the contract has been moving in a sideways trend since the beginning of the current week. Nonetheless, the price remains below both 21- and 50-DMAs — a bearish indication.

Even though the major trend is negative, there are indications of bears losing the momentum. The daily RSI is hovering in the oversold levels and the MACD indicator on the daily chart, though is in the negative zone, is hinting that bears are losing strength.

The contract has been trading between two key levels at ₹140 and ₹150. 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 whereas if the contract breaches the support at ₹140, the price could drop to ₹126 — its prior low.

On the global front, the three-month rolling forward contract of Zinc on the LME continues to extend the downtrend. On Wednesday, it broke below $1,800 and the price action indicate that the contract might continue to decline. This can weigh on the contract price on the MCX.

Trading strategy

Since the overall trend on the MCX and LME is negative, one can take a bearish view. But the contract has a support at ₹140. So, traders can sell the contract with a stop-loss at ₹150 if it slips below ₹140.

Published on March 26, 2020
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