Technical Analysis

MCX-Zinc bounces from a key support

Gurumurthy K BL Research Bureau | Updated on January 08, 2019 Published on January 08, 2019

 It was a volatile week for the Zinc futures contract on the Multi Commodity Exchange of India (MCX). The contract fell breaking below the crucial support level of ₹170 per kg and made a low of ₹167.2 on Thursday last week. However, the contract has reversed sharply higher from the low recovering all the loss. The MCX-Zinc futures contract has surged about 6 per cent from the low of ₹167.2 and is currently trading at ₹177 per kg.

Close watch required

The bounceback in the past week has happened from a key long-term support level of ₹167. The price action in the coming days will need a close watch to get a cue on the next direction of move. Traders can stay out of the market at the moment.

An immediate support is in ₹172-170 region. As long as the contract trades above this support zone, a corrective rally to ₹183 or ₹185 is likely in the near term. A break above ₹185 will then increase the likelihood of the upmove extending towards ₹190.

The region between ₹167 and ₹165 is a key support to watch. The contract will come under renewed pressure if it breaks below ₹165. The next targets are ₹160 and ₹155. But such a strong fall breaking below ₹165 looks less probable at the moment.

Global trend

The Zinc (three-month forward) contract on LME fell in the past week as expected to test the key support level of $2,400 per tonne. The contract made a low of $2,356 and has reversed sharply higher from there. It is currently trading at $2,498 per tonne.

Next resistance is at $2,530 which is likely to be tested in the near term. A strong break above this hurdle can take the contract higher to $2,600. But a pullback from $2,530 will drag contract lower towards $2,400 again.

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