The recent rebound on the equity markets also drove the base metals prices slightly higher. Some of them are now testing intermediate resistance levels. The zinc is one of these commodities.
The long-term bearish trend between November 2006 and October 2008 has seen zinc prices declining by 77%, from a historical high of $4,620 (point A on the chart) to a low at $1,062 (point B).
The apogee of the bearish trend occurred in early October last year when the price action broke below the support line of the declining trading channel (point C). As a result prices fell by 27$ in two weeks and a low was eventually posted at $1,062. It is potentially the end of the long-term bearish trend.
Indeed, prices have been moving within a horizontal trading channel since this low. The current rebound took off on February 20 as prices bounced on the lower band of the horizontal trading channel, at $1,060 (point D). However this technically-driven move is likely to lose its momentum as prices approach the upper band of the trading channel. This level corresponds to the level around $1,350
It also corresponds to the long-term resistance line (red line). That’s why the area around $1,350 should prevent a further move on the upside.
The MACD and the RSI remain well oriented but the technical Momentum indicator is posting extreme high points. Therefore we do not expect a sharp swing or reversal move but more a flagging price action before an eventual pull back.
As long as $1,350 is not cleared, the target towards the intermediary support of 1,175 is favoured, and then potentially a further retracement to the support level of $1,060. However, if the price action breaks the resistance of $1,350, it would give some fresh new momentum. It would be the end of the bearish trend and the rebound would drive the price to the next resistance level, at $1,630.
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