Zinc futures on the Multi Commodity Exchange (MCX) have experienced a declining trend since February but have recently shifted into a sideways pattern since the final week of May. This means that the continuous contract has been fluctuating between the price levels of ₹208 and ₹225.
The nearest expiry, which is the September futures contract, has predominantly stayed within the range of ₹210 and ₹225. Over the last three weeks, this contract has witnessed a rally and is presently trading around ₹221. However, as it currently hovers near the upper boundary of this range, and the upward momentum appears to have weakened, the likelihood of a downward movement has increased.
Should the rally persist from this point, it is improbable that it will breach the ₹225 mark. Our expectation is a price decline either from the current level or after reaching ₹225. This downward movement could potentially bring the contract closer to the lower end of the established range at ₹210.
Trade strategy
Last week, we suggested shorting zinc futures at ₹220. Hold this trade and in case the price moves up from here, add shorts at ₹225. Retain the stop-loss at ₹230.
When the contract falls to ₹215, tighten the stop-loss to ₹220. Book profits at ₹210.