Zinc futures on the Multi Commodity Exchange (MCX) has maintained a lateral trend since early October. The November contract has largely been moving in the range of ₹275-292.
That said, towards the end of September it broke out of ₹275, which led to the confirmation of a bull flag pattern. So, even though the contract is now moving in a horizontal direction, we expect the contract to eventually rally from the current level.
According to the bull flag pattern, zinc futures is likely to touch ₹340 in the near-term. But before that, it should breach the barrier at ₹300, which is now holding back the bulls.
In case zinc futures drop from the current level and slip below the support at ₹275, the near-term outlook can turn bearish. In such a scenario, the contract can moderate to ₹250.
Trading strategy
Buy zinc futures when its price softens to ₹275. Stop-loss can be 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.