MCX-Zinc remains above key base

The July futures contract of zinc on the Multi Commodity Exchange (MCX), which was in an uptrend for the past three months, seems to have lost steam as it struggles to make fresh highs. That said, the trend has not reversed and bulls have a chance as long as the contract remains above ₹159. This is a critical support as the 23.6 per cent Fibonacci retracement level of the previous rally and the 50-DMA align at this level.

Though there is no confirmation of a trend reversal, certainly there are indications of bulls losing traction. The daily RSI, though above the midpoint level of 50, has little momentum. Also, the MACD indicator, despite being in the positive territory, is signalling weakness as the trajectory is downward.

If bears build up strength, resulting in the contract slipping below the crucial support level of ₹159, it might turn the short-term trend bearish. Below ₹159, the price could even drop to ₹150. On the other hand, if the contract advances from the current levels, ₹166 can be a strong hurdle. A breakout of this level could mean the resumption of the uptrend where the price could rise to ₹175.

On the global front, the trend of the three-month rolling forward contract of zinc on the London Metal Exchange remains bullish even after witnessing a correction. Also, the contract remains above the critical support of $2,000. Until it stays that way, bulls have a good chance to regain momentum. An upswing in global prices can positively influence the contract on the MCX.

Trading strategy

Even though there are signs of weakness, there is no confirmation yet of a trend reversal in MCX-Zinc. Moreover, it has a strong support at ₹159. Also, globally the trend remains bullish despite facing a price correction. Hence, traders can go long on MCX-Zinc with stop-loss at ₹155.

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