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Zinc futures on the Multi Commodity Exchange (MCX) continued to move sideways over the past week as well. The horizontal trend has been in effect since early October.
The November expiry has largely been oscillating between ₹275 and ₹290. However, the broader trend is bullish as a breakout of ₹275 in September confirmed a bull flag pattern.
As per the chart set up, zinc futures has the potential to rally to ₹340. However, there is a notable resistance at ₹300, which can keep the bulls at bay.
That said, for zinc futures to lose the bullish inclination, the price should drop below the support at ₹275. In such a case, the contract can decline to ₹250, a support.
But as it stands, although the price is flat, the broader trend is bullish until the support at ₹275 holds true. The 50-day moving average coincides at ₹275, making it a strong base.
Trade strategy
Go long on zinc futures if it dips to ₹275. Keep stop-loss at ₹260. When the contract touches ₹300, revise the stop-loss to ₹285. Tighten the stop-loss further to ₹310 when the price hits ₹320. Trail the stop-loss to ₹320 when the contract rallies to ₹330. Liquidate the longs at ₹340.
If the contract breaks out of ₹300 rather than softening to ₹275, one can go long with initial stop-loss at ₹285. Stop-loss adjustments and target can be as mentioned above.
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