Commodity Calls

Outlook is positive for MCX-Zinc

Gurumurthy K | Updated on February 26, 2019 Published on February 26, 2019

The Zinc futures contract on the Multi Commodity Exchange of India (MCX) extended its upmove in the past week. The contract has risen about 2 per cent in the past week breaking above the key resistance level of ₹191.5 per kg. It is currently trading at ₹195 per kg.

The outlook is positive and the MCX-Zinc futures contract can move further higher in the coming days. Key support is in the ₹192-₹191 zone which is likely to limit the downside. Dips to this support zone is likely to find fresh buyers coming into the market. An up-move to ₹199 is likely in the near term. A break above ₹199 can take the contract higher to ₹203. The region between ₹202 and ₹203 is crucial medium-term resistance. Inability to breach ₹203 can trigger a pull-back move to ₹195 or even ₹190 again. But a strong break and a decisive close above ₹203 will boost the momentum. It will then increase the likelihood of the contract rallying to ₹215 over the medium term.

Trading strategy

Medium-term traders who have taken long positions at ₹195 and ₹193 can hold it. Retain the stop-loss at ₹183 for the target of ₹212. Revise the stop-loss higher to ₹198 as soon as the contract moves up to ₹201. Move the stop-loss to ₹202 when the contract moves up to ₹208.

Global trend

The Zinc (3-month forward) contract on the London Metal Exchange (LME) has risen over 2 per cent in the past week. It is currently trading at $2,719 per tonne. Near-term outlook is bullish. A rise to $2,820 looks likely in the near term. The level of $2,820 is a strong medium-term trend resistance. Inability to breach this hurdle can trigger a pull-back move to $2,650. But a strong break above $2,820 will pave way for the next target of $2,930.

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

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