Technical Analysis

Zinc futures in narrow range

Akhil Nallamuthu | Updated on: Jan 11, 2022
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For the existing longs, traders can further tighten the stop-loss to ₹282 from ₹278 and wait for the target at ₹300

The continuous contract of zinc futures on the Multi Commodity Exchange (MCX) witnessed a downtrend between October and November last year. In this period, the contract declined from the high of ₹326.8 to ₹260. Although there has been a recovery, there is no strength in the rally and is currently hovering at around ₹286.

Following some positive signs, in the third week of December, we had advised to go long on zinc futures at around ₹278 and at ₹270 with initial stop-loss at ₹260. We suggested to partially book profits i.e., 50 per cent when price rallies to ₹290 and then revise the stop-loss to ₹278. In line with our expectation, the contract rose and made a fresh two-month high of ₹293.75 last week. Therefore, as it stands, we will be holding 50 per cent of the longs with stop-loss at ₹278 with target at ₹300.

Nevertheless, the recent price action shows that the contract has not gathered enough momentum to establish a strong rally. In fact, it has been trading in the narrow range of ₹283 and ₹292 over the past couple of weeks. Notably, prolonged consolidation could dent the chances of further rally. Indicators like the relative strength index (RSI) and the moving average convergence divergence (MACD) are indicating a lack of trend.

Hence, for the existing longs, traders can further tighten the stop-loss to ₹282 from ₹278 and wait for the target at ₹300. So, the exit would be either at ₹282 or at ₹300. At the moment no fresh trades are recommended.

Published on January 11, 2022

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