Technical Analysis

MCX-Zinc in consolidation phase

Akhil Nallamuthu BL Research Bureau | Updated on December 12, 2019



The spot price of Zinc on the Multi Commodity Exchange of India, has been moving in a sideways trend between ₹181.4 and ₹184.5 for the past few trading sessions. Even though the overall trend is bearish, further decline is unlikely unless the price breaks below ₹181.4.

Similarly, the December futures contract of Zinc on the MCX is fluctuating between ₹181 and ₹185. The contract’s attempt to rally has been capped by the upper limit of the range at ₹185, and of late, the price action is trading with a bearish bias. Hence, for the commodity to build a sustainable rally, the price should move past the range top decisively.

The daily RSI has been trading off the over-sold levels; but there are no noticeable bullish indications as the index have become flat after showing an uptick. However, the Moving Average Convergence Divergence indicator is exhibiting signs of weakness — a bearish momentum.

The contract can be expected to establish the next leg of trend only if it moves out of the range. If it breaks above the upper boundary at ₹185, the nearest resistance is at ₹188.8. On the other hand, if the contract breaks below the lower boundary at ₹181, it can depreciate to ₹174.

On the LME, the three-month rolling forward contract of Zinc, has also been trading in a sideways trend since last week. It is held between $2,200 and $2,260. Above $2,260, the resistance is at $2,320 whereas the support below $2,200 is at $2,140.

Trading strategy

Though the downtrend seems to have come to a halt, MCX-Zinc futures is struggling to reverse the trend as it consolidates between ₹181 and ₹185. Hence, traders are recommended to stay on the sidelines until either of these levels are breached. The direction of the breakout would confirm the direction of the trend.

Published on December 13, 2019

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