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The support in the ₹205-207 band has held well for the zinc futures contract on the Multi Commodity Exchange (MCX) in the past week, as expected.
The contract made a low of ₹206.5 a kg on Thursday and reversed higher from there to a high of ₹214.35 on Monday. The contract has come-off slightly from the high and is currently trading at ₹211/kg. Immediate resistance is at ₹213.5.
As long as the contract trades below this resistance, a dip to ₹209.5, the 21-day moving average, is possible in the near-term. Further break below ₹209.5 will increase the likelihood of the down-move extending to ₹206 or ₹205.
The contract will gain fresh momentum only if it breaks above the resistance at ₹213.5 decisively. The next target is ₹216. Further break above ₹216 will then increase the likelihood of the rally extending to ₹218.5 or even to ₹221 going forward.
Traders can stay out of the market at the moment. Wait for dips and go long if the contract reverses higher from the ₹205-206 support zone. Keep stop-loss at ₹203 for the target ₹213. Revise the stop-loss higher to ₹208 as soon as the contract moves to ₹210.
The contract will come under pressure if it declines below ₹205 decisively. Such a break will increase the downside pressure. In such a scenario, the contract can fall to ₹197.
Note: The recommendations are based on technical analysis and there is a risk of loss in trading.
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