Zinc futures have been on a decline since the beginning of the week. The June contract is trading at ₹356 (per kg) whereas the July futures is now at ₹353, thus trading at a discount.
Since the June futures is set to expire soon (June 30), here we have considered the July contract for analysis and trade recommendation.
The price action shows that the July futures has been blocked by the resistance at ₹370 for over a month. Sideways movement around these levels led to the bulls losing traction and bears gaining momentum.
Consequently, the price declined and on Wednesday, the July zinc futures breached a support at ₹355. Also, the price slipped below the 50-day moving average.
Going ahead, we might see the price rising to ₹358-360 region. But then, the contract is likely to resume the decline touch ₹340 in the near-term. Therefore, traders can consider fresh short positions.
That said, if zinc futures (July) breaks out of ₹360, the upswing can extend to ₹370-374 price band.
Trade strategy
Sell zinc futures (July) at ₹357 with a stop-loss at ₹363. When the price falls to ₹345, revise the stop-loss to ₹350. Book profits at ₹340.