After testing a key resistance at ₹200 per kg the Zinc futures contract on the Multi Commodity Exchange of India (MCX) began to decline once again. Since encountering a key resistance in the ₹200-203 band in early February this year, the contract has been in a sideways consolidation phase in the wide range between ₹185 and ₹203. The key resistance band mentioned above is limiting the upside. The contract is up 1.4 per cent and is trading at ₹195.6 per kg on Tuesday.

Continuation of the upmove can re-test the key resistance at ₹203 in the coming trading session. A strong break above this barrier will strengthen the uptrend that has been in place since taking support at ₹167 in early January this year. Such a break can accelerate the contract higher to ₹206 and then to ₹210 in the near-term. A further break above ₹210 can take the contract northwards to ₹215 and ₹220 levels over the medium term. Hence, traders should remain cautious as long as the contract trades below ₹203.

Fresh long positions can be initiated on a strong rally above ₹203 with a fixed stop-loss. On the other hand, a decisive fall below the immediate support level of ₹190 can drag the contract down to the lower boundary of the sideways movement at ₹185. A further slump below ₹185 can drag the contract down to ₹180 and then to ₹175 levels.

Trading strategy

Traders with a short-term horizon can take long positions on a strong rally above ₹203 with a stop-loss at ₹196. Targets are ₹210 and ₹215. Revise the stop-loss higher to ₹203 as soon as the contract moves up to ₹210.

Global trend

The Zinc (three-month rolling forward) contract on the London Metal Exchange (LME) is in a corrective decline. The contract faces a key resistance ahead at $2,875 per tonne. It is currently trading at $2,839. A strong break above $2,875 can take the contract higher to $2,900 and $2,950 levels. On the downside, a fall below $2,800 can drag it lower to $2,750 or $2,700 levels in the short term.

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