The zinc futures contract on the Multi Commodity Exchange (MCX) broke its prolonged sideways range, downwards in the past week. The contract which was stuck in between ₹207 and ₹216 a kg for over a month tumbled sharply below ₹207 and made a low of ₹201.65 on Thursday last week. The contract has bounced from this low and is currently trading at ₹206 per kg.
Upside restricted
Although the contract has bounced from the low of ₹201.65, the price action indicate that it lacks strength. Key resistance is in the range between ₹209 and ₹210. The possibility of the current upmove extending to test this resistance zone in the near term cannot be ruled out. But a break above ₹210 is less probable.
A downward reversal from the ₹209-₹210 resistance region can bring fresh selling pressure to the contract. Such a pull-back move can drag the MCX-Zinc futures contract lower to ₹200-₹199 or even to ₹197 in the coming weeks.
On the other hand, if the contract manages to breach ₹210 decisively, the downside pressure can ease. Such a break can take the contract higher to ₹215.
Trading strategy
Short-term traders can make use of rallies to go short at ₹208 and ₹209. Stop-loss can be placed at ₹212 for the target of ₹201. Revise the stop-loss lower to ₹206 as soon as the contract moves down to ₹204.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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