The near-term outlook for zinc futures contracts traded on the multi-commodity exchange (MCX) is bullish. The contract surged above key resistances at INR 277 and INR 281 on Wednesday. It is currently trading at £284. We also observed an inverted head and shoulders pattern on the daily chart. The neckline support for this pattern is around Rs 277.
The price action since September shows a strong base formation. This, coupled with the reversal head and shoulders pattern, reinforces the bullish case of a trend reversal. The moving averages are also a bullish sign. As such, intermediate falls can find support around INR 277. The deal could rise to Rs 295-300 in the next 1-2 weeks.
Our bullish outlook will be quashed only if MCX Zinc breaks below ₹277. In that case, a drop to levels below Rs 270 is possible.
Last week, we suggested going long at INR 271. The modified stop loss for that position is now ₹274. Move the position’s stop loss to ₹278. Once the contract rises to his ₹288, move the stop loss further to ₹283. Finish Longs at 290 rupees.
Traders who do not hold positions can go long at the current level. Save up on dips at INR 278. Keep the stop loss at INR 273. As soon as the contract rises to his ₹291, modify the stop loss to ₹286. When the MCX Zinc contract is up and he reaches ₹296, move the stop loss further to ₹293. Book a profit at INR 298.