Technical Analysis

MCX-Zinc rebounds from a key support

Gurumurthy K BL Research Bureau | Updated on February 19, 2019 Published on February 20, 2019

The Zinc futures contract on the MCX extended its fall in the initial part of last week but reversed sharply higher recovering all the loss. The contract made a low of ₹183.4 per kg on Wednesday last week and bounced back sharply. It is currently trading at ₹191 per kg.

The 55-DMA at ₹184 has held well and has halted the corrective fall that has been in place since the first week of this month.

A key resistance is in the ₹191-191.5 region. Inability to breach ₹191.5 can pull the contract lower to ₹185 and ₹184 again. In such a scenario, a range-bound move between ₹184 and ₹192 is possible for some time. A strong break below ₹184 will bring renewed selling pressure on the contract and drag it to ₹180 or even ₹175.

On the other hand, if the MCX-Zinc futures contract breaks above ₹191.5 decisively, it can gain momentum. Such a break will then increase the likelihood of the contract rallying to ₹200 and ₹203 levels in the coming weeks.

Medium-term traders who have taken long positions at ₹195 and ₹193 can hold it. Retain the stop-loss at ₹183 for the target of ₹212. Revise the stop-loss higher to ₹202 as soon as the contract moves up to ₹208.

Global trend

The Zinc (three-month forward) contract on the LME fell, breaking below the key support level of $2,650 in the past week. The contract recorded a low of $2,575 and has bounced from there.

 

Inability to rise past $2,650 can keep the contract under pressure. In such a scenario, the contract will remain vulnerable to break below $,2575 and fall to $2,500.

But a strong break and a decisive close above $2,650 will ease the downside pressure. Such a move will then keep the outlook bullish and take the contract higher to $2,800 levels.

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