Resistance can cap the upside in MCX Zinc

High-risk appetite traders with a medium-term perspective can go short on rallies at ₹214 and at ₹216

The zinc futures contract on the Multi Commodity Exchange (MCX) extended its fall in the past week. The contract tumbled over 3 per cent during intra-week to mark a low of ₹207.75 per kg on Friday. It has however managed to bounce from this low and has been hovering at the key support level of ₹210 over the last couple of days. The contract is currently trading at ₹212 per kg.

The immediate outlook is unclear. Resistance is at ₹216.5 and support is at ₹210. A range bound move between ₹210 and ₹216.5 is possible for some time. A breakout on either side of ₹216.5 or ₹210 will then decide the next leg of move.  Traders can stay out of the market until the range breakout which gives a clear trade signal.

Bearish bias

The bias on the charts is bearish. The resistance at ₹216.5 is likely to cap the upside in the coming days. Also, since the contract has been falling continuously over the last two weeks, it might not gain momentum immediately to breach the ₹216.5 resistance. Though an intermediate bounce to test this resistance cannot be ruled out in the near-term, a break above it is less probable. An eventual break below ₹210 will see the MCX-Zinc futures contract tumbling towards ₹201 or ₹199 in the short-term.

On the other hand, the downside pressure will ease if the contract breaks above ₹216.5 decisively. Such a break can take it higher to ₹219 or ₹220. However, the outlook will turn positive only if the contract manages to breach ₹220 decisively which looks unlikely in the near term.

Trading strategy

High-risk appetite traders with a medium-term perspective can go short on rallies at ₹214 and at ₹216. Stop-loss can be placed at ₹221 for the target of ₹201. Revise the stop-loss lower to ₹211 as soon as the contract moves down to ₹208.

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

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