Commodity Calls

Resistance may cap the upside for MCX-Zinc

Gurumurthy K Updated on April 17, 2018

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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