The prices of zinc have been on a decline since the final week of April. The continuous contract of this metal on the MCX (Multi Commodity Exchange) started to fall after hitting a high of ₹383.4 in April. Last week, after marking a seven-month low of ₹266.4, it closed at ₹278.9, thereby losing about 27 per cent from the high. This means, the MCX zinc futures is technically in a bear market.
That said, it should be noted that ₹266 is a support. Also, the 50 per cent Fibonacci retracement of the prior rally lies at ₹257. Thus, the price band of ₹257-266 can offer good support and the bulls might be looking to capitalise on it and push up prices. But note that it should cross the hurdle at ₹290 to turn the short-term trend bullish.
On the other hand, a breach of ₹257 can result in the contract witnessing another leg of downtrend.
So, as it stands, the contract should either breach ₹257 or ₹290 for us to assume the next swing in price with reasonable certainty. So, our suggestion is to stay away for now.
Traders can short MCX zinc futures with stop-loss at ₹270 if it slips below the support at ₹257 from here. Exit the shorts at ₹228 – a considerable support level.
But if the contract rallies above ₹290, go long with stop-loss at ₹266. Liquidate the longs when the price touches ₹340, a resistance level.