Zinc futures on the Multi Commodity Exchange (MCX), which has been on a fall since February, has started to chart a sideways trend since the final week of May. That is, the continuous contract has been oscillating within ₹208 and ₹225.
The nearest expiry i.e., the September futures has largely been moving within ₹210 and ₹225. Over the past couple of weeks, the contract has seen a rally and is now trading around ₹220.
Since it is now hovering near the range top, and the upward move seems to have lost momentum, the chances for a fall have gone up over the past few sessions. If the rally extends from here, it is unlikely to be extended beyond ₹225.
We anticipate a fall in price from the current level or after moving to ₹225. The downswing can take the contract towards the lower end of the range - ₹210.
Trade strategy
Since the risk-reward is now favourable for fresh short positions, one can sell zinc futures at the current level of ₹220. Add shorts in case the price goes up to ₹225. Place stop-loss at ₹230.
When the contract declines to ₹215, tighten the stop-loss to ₹220. Book profits at ₹210.