Zinc prices have come down sharply over the last one week. The Zinc Futures contract on the Multi Commodity Exchange (MCX) has tumbled about 4 per cent from around ₹267.50 per kg last week to the current levels of ₹257 per kg. This was contrary to our expectation to see a rise towards ₹282. That bullish view had gone wrong.
Outlook
The short-term trend is down, and it is strong. Immediate resistance is at ₹260. Above that ₹265 is the higher resistance. Support is around ₹253 which is holding as of now. As long as the contract trades above ₹253, the chances are high to see a corrective bounce to ₹260 or ₹265. However, the broader bias will remain negative. As such the upside is likely to be capped at ₹265. We can expect fresh sellers coming into the market and limit the upside.
A reversal either from ₹260 itself or ₹265 can drag the MCX Zinc Futures contract below the support at ₹253. That can take the contract down to ₹247 or ₹244 going forward.
To negate this fall, the contract has to rise past ₹265 decisively. Only then the bias will turn positive and take the contract up to ₹275 and higher. But such a strong rise looks less likely as seen from the charts.
Trade Strategy
Traders can go short below ₹253. Keep the stop-loss at ₹256. Trail the stop-loss down to ₹251 as soon as the contract falls to ₹249. Move the stop-loss further down to ₹249 when the contract touches ₹247. Exit the shorts at ₹245.