MCX-Zinc in consolidation phase

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.