Technical Analysis

Near-term outlook is positive for MCX-Zinc

Gurumurthy K BL Research Bureau | Updated on December 04, 2018 Published on December 04, 2018

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.)

Read the rest of this article by Signing up for Portfolio.It's completely free!

What You'll Get

This article is closed for comments.
Please Email the Editor