Technical Analysis

MCX-Zinc set to advance further

Akhil Nallamuthu BL Research Bureau | Updated on April 16, 2020 Published on April 16, 2020

The April futures contract of Zinc mini on the MCX had been in a downtrend since the beginning of the year. It had lost about 30 per cent when it registered a low of ₹125.8 during the third week of last month. But after that, the contract recovered and started to consolidate around ₹145. On Thursday, the contract breached the key resistance level of ₹150 and is above 21-DMA. This opens the door for further strengthening.

The daily RSI, though below the midpoint level of 50, has been rising along the contract price after showing a bullish divergence — an indication of bullish reversal. The MACD indicator on the daily chart has been signalling good upward momentum since the first week of this month.

As the contract has broken out of the resistance at ₹150, it will most likely witness a substantial rally. The immediate hindrance will be the price band between ₹158 and ₹160. Subsequent resistance can be spotted at ₹164. On the other hand, if the contract declines because of renewed selling pressure, it might retest ₹140. A break below that level can drag the contract to its prior low at ₹125.8.

On the global front, the three-month rolling forward contract of zinc on the LME remains above $1,900 and as long as the price stays above that level, the near-term trend can be bullish. A break out of $2,000 can potentially turn the medium-term trend bullish. As price of the metal rises in the global market, it can positively can lift the price on the MCX as well.

Trading strategy

The price action of futures on the MCX indicates a bullish bias and a daily close above ₹150 increases the chance of rally from current levels. Also, globally the price of the metal could advance as hinted by the LME contract. Hence, traders can buy the contract on declines with stop-loss at ₹140.

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

Published on April 16, 2020

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