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The price of futures contract of zinc on the Multi Commodity Exchange (MCX) has been gaining steadily after bottoming out in mid-March last year. After facing a consolidation phase in September, the futures contract expiring January 2021, broke out of the crucial level of ₹200 and rallied to ₹220 levels.
But, the bulls are now facing a challenge as the contract has been trading in a rectangular pattern, oscillating between ₹213 and ₹224, since past six weeks. However, this time, a considerable weakness can be observed and the uptrend seems to be losing strength.
This can be observed in indicators like the relative strength index (RSI) and the moving average convergence divergence (MACD) on the daily chart. That is, the RSI has gone into the bearish territory and the MACD is on the verge of slipping into the negative zone. Meanwhile, the price has gone below both 21- and 50-day moving averages, turning the outlook negative.
Yet, until the contract breaches the lower limit of the range ₹213, bearish reversal cannot be confirmed. So, unless this support is invalidated, traders should wait.
One can short the contract with stop-loss at ₹222 if it decisively breaks below ₹213. On the downside, the price might drop to ₹200. In case if this level is taken down, the nearest support can be spotted at ₹192.
On the other hand, if it rebounds off the support at ₹213, it can face hindrances at ₹220 and ₹224.
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