Rally in MCX-Zinc signals bullishness in contract

The Zinc futures contract on the Multi Commodity Exchange (MCX) has been inching higher over the last several weeks. After marking a low of ₹198.5 in the second week of December, the contract reversed higher. It has surged over 7 per cent from the December low and is currently trading at ₹216.

This rally over the last one month has taken the contract well above a key resistance level of ₹213. It also signals that the overall uptrend that has been in place since June 2017 has resumed.

Additionally, the 21-day moving average is on the verge of crossing over the 55-day moving average, which supports the bullish bias.

The region between ₹213 and ₹210 will serve as a strong short-term support for the contract. Dips to this support zone can see fresh buyers coming into the market. The current leg of upmove has the potential to target ₹225 and ₹227 in the coming weeks.

Traders with a medium-term perspective can go long. Accumulate on dips near ₹213. Keep the stop-loss at ₹208 for a target of ₹225. Revise the stop-loss higher to ₹217 as soon as the contract moves up to ₹221.

The near-term view will turn negative if the contract breaks below ₹210. The next targets are ₹208 and ₹206. The outlook will turn bearish and the contract can fall to ₹200 only if it declines below ₹206. But such a strong fall looks unlikely at the moment.

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

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