The May futures contract of zinc on the MCX, which has been in a downtrend since the beginning of the year, recovered after making a low of ₹131.9 in mid-March. Currently trading around ₹151, the contract is facing a significant resistance at ₹154, where the 50-DMA and 38.2 per cent Fiboancci retracement level of the previous downtrend coincides. So, as long as the price remains below that level, the contract experience downtrendp.

The recovery seems to have hit a wall and the loss of strength is indicated by the Moving Average Convergence Divergence (MACD) indicator on the the daily chart which remains in the negative territory. The daily Relative Strength Index (RSI) has been flat as the contract is moving sideways since the past one week. It is hovering at the midpoint level of 50.

Since the major trend is downward, if the contract weakens and breaches the support at ₹145, it might slip to ₹140. Below that level, it can retest its previous low at ₹131.9. Whereas, if the contract regains momentum and breaks out of ₹154, the medium-term trend might turn bullish and the price could rise to ₹168 – its 61.8 per cent Fibonacci retracement level. Above that level, ₹173 can act as a hurdle.

On the global front, the three-month rolling forward contract of zinc on the London Metal Exchange (LME) is consolidating between $1,868 and $1,950. As the major trend is negative, a prolonged consolidation could open the door for a decline.

Trading strategy

For the past one week, the contract on the MCX and LME has been flat. But the major trend remains negative. Notably, the contract on the MCX is unable to rally past the resistance at ₹154. Since it is trading near the resistance, the risk-reward ratio is favourable for short position. Hence, traders can sell the contract with stop-loss at ₹157.

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

Related Topics
comment COMMENT NOW