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The zinc futures contract on the Multi Commodity Exchange (MCX) has been stuck in a narrow range between ₹174 and ₹182 per kg for more than two weeks. This leaves the immediate outlook unclear for the contract. The contract is currently hovering at the upper end of the range at ₹180 per kg.
A breakout on either side of ₹174 or ₹182 will decide the next move. A strong break above ₹182, will ease the downside pressure. Such a break will trigger a corrective rally to ₹192 on the back of short-covering. The region around ₹192 is crucial short-term resistance. The outlook will turn bullish only if the contract breaks above ₹192 decisively. Such a break will pave way for the next target of ₹200. But inability to breach ₹192 and a pull-back from this level can drag the contract lower to ₹180 levels again. In such a scenario, a range-bound move between ₹174 and ₹192 can be seen for some time.
On the other hand, if the MCX-Zinc futures contract breaks the current sideways range below ₹174, it will come under renewed pressure. Such a break can drag the contract lower to ₹170. Further break below ₹170 will then increase the likelihood of the contract tumbling to ₹165 and ₹160.
Trading strategy
Short-term traders who have taken short positions at ₹179 and ₹181 can hold it. Retain the stop-loss at ₹185 for the target of ₹167. Revise the stop-loss lower to ₹176 as soon as the contract moves down to ₹173.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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