Near-term outlook is positive for MCX-Zinc

The Zinc futures contract on the Multi Commodity Exchange of India has reversed higher in the past week. The contract made a low of ₹174.5 per kg on November 28 and has bounced higher. The contract has surged over 6 per cent from the low and is currently trading at ₹186 per kg.

The crucial long-term trend support at ₹175 has held very well and has triggered an upward reversal. The near-term outlook is positive. Immediate support is at ₹181. As long as the contract trades above ₹181, an up-move to ₹193 and ₹194 is possible in the coming days. The level of ₹194 – the 100-week moving average is a key short-term resistance. This hurdle has been capping the upside over the last few weeks. Inability to breach the ₹193-194 resistance zone can pull the contract lower again to ₹185 or even ₹180. In such a scenario, a range-bound move between ₹180 and ₹194 can be seen for some time.

But if the MCX-Zinc futures contract manages to breach ₹194 decisively, it can gain further strength. Such a break will then increase the likelihood of the contract extending its up-move towards ₹199 and ₹200.

The region around ₹200 is a crucial medium-term resistance. A strong break and a decisive weekly close above this hurdle is needed to turn the outlook completely bullish.

Trading strategy

Traders with a medium-term perspective can go long at current levels and also accumulate on dips at ₹183 and ₹181. Keep the stop-loss at ₹178 for the target of ₹199. Revise the stop-loss higher to ₹190 as soon as the contract moves up to ₹192.

On the global front, the Zinc (three-month forward) contract on the LME took support at ₹2,400 per tonne recently and started to move higher. It is currently trading at around $2,583 per tonne. The contract now tests a key resistance at $2,600. A strong rally above this barrier can take the contract higher to $2,630 and $2,650. But, a fall below the immediate support level of $2,500 can drag the contract down to $2,400 in the short term.

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

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