Technical Analysis

Trend remains bearish for MCX-Zinc

Akhil Nallamuthu BL Research Bureau | Updated on February 13, 2020 Published on February 14, 2020

The spot price of Zinc on the Multi Commodity Exchange of India (MCX) continued to trend lower in the past week; it had breached an important support at ₹175. The outlook remains bearish as indicated by the price action of the metal.

The February mini futures contract of Zinc on the MCX, like the spot price, weakened during the past week. It declined below its prior low of ₹170.15 and the price action on the daily chart hints at further weakening. Corroborating the bearish outlook, the Moving Average Convergence Divergence (MACD) indicator on the daily chart exhibits considerable downward momentum as it extends further into the bearish zone. But the daily Relative Strength Index (RSI), though remains below the mid-point level of 50, stays flat. Notably, it hovers near the over-sold levels.

Since the major trend is bearish, the futures contract will most likely witness sell-off from current levels and the price could drop to ₹165 in the coming days. If that level is breached, it can even slump to ₹160 in the near term. On the other hand, if the metal manages to reverse the trend in its favour, it will face a minor hurdle at ₹174.4, above which the resistance can be spotted at ₹180, where the 50-day moving average coincides.

 

On the global front, the three-month rolling forward contract of Zinc on the London Metal Exchange (LME) declined last week. It registered a fresh multi-year low of $2,117 on Monday and the outlook remains weak. The metal will be subject to considerable selling pressure until the price stays below $2,200.

Trading strategy

The futures contract on the MCX continues to exhibit weakness and the forward contract in LME is likely to register new lows. Thus, the outlook remains bearish for the metal. Hence, traders can initiate fresh short positions in MCX-Zinc mini contract on rallies. Place stop-loss at ₹176.

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

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Published on February 14, 2020
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