The zinc futures contract on the Multi Commodity Exchange breached the resistance at ₹210 per kg and witnessed a strong rally last week which was contrary to our expectation. The contract has surged over 3 per cent in the past week. It is currently trading at ₹215 per kg.

Resistance ahead

The price action on the chart indicates that the strong up-move that happened in the past week seems to be losing momentum. Technically, the resistance in the ₹215-₹217 region has halted this rally and the contract has been stuck in a narrow range between ₹211 and ₹216 over the last couple of days. Whether the contract breaks above ₹217 or not will decide the next move.

A strong break and a decisive close above ₹217 will ease the downside pressure. Such a break can take the contract higher to ₹221. Further break above ₹221 will boost the momentum and will pave the way for next targets of ₹230 and ₹235.

On the other hand, if the MCX-Zinc futures contract remains below ₹217, it can remain range-bound between ₹211 and ₹217 for some more time. The level of ₹210 is a significant support for the contract. A strong break below it can bring back the pressure on the contract. Such a break can pull the contract lower to ₹207 or ₹205. Further break below ₹205 will then increase the likelihood of the contract tumbling to ₹200.

Trading strategy

Traders with a high-risk appetite can go long on a break above ₹217. Stop-loss can be placed at ₹212 for the target of ₹227. Revise the stop-loss higher to ₹218 as soon as the contract moves up to ₹219.5

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

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