Chart Of The Day: Buy Signal At Hand For Plunging Zinc?

Chart Of The Day: Buy Signal At Hand For Plunging Zinc?  | Jul 11, 2018 15:01

Zinc prices plummeted 4.5 percent today, hitting their lowest level in almost 13 months, after the Trump administration threatened further tariffs on an additional $200B worth of Chinese goods. The record low for the base metal prompted aggressive traders to bid prices back up, erasing about half of the earlier selloff. It may also be presenting bargain hunters with even greater opportunities.

According to JP Morgan analysts, the commodity remains significantly underpriced: in its third-quarter 2018 Guide to the Markets update, the US investment bank pointed out that zinc is currently trading markedly below its mean price.

Zinc Daily Chart

The weekly RSI is in the most oversold condition since September 2015, while the daily indicator is also at the most oversold level in years. Today’s low of 2503.00 indicated that traders responded to the psychological, round number of 2500.

Should prices close at these levels, they would form a hammer, a candlestick indicating that bulls might be taken over after a decline, forcing bears into a short squeeze, prompting further rallies. The MACD tracks the RSI's pattern. Should the hammer come through, the RSI and MACD are poised to provide the most active buying signals in years.

Trading Strategies – Long Position Setup

Conservative traders would avoid this trade, as they only trade in line with the trend, and this one is severely down.

Moderate traders may risk a small position, if tomorrow's trading confirms demand at these levels, followed by a retest of the support level, to allow for entry, with a close stop-loss.

Aggressive traders might enter after the closing price confirms the hammer.

Equity Management

Entering a position based on overheated price action is not trading but rather gambling. A true investment only occurs after establishing a risk-reward ratio that is acceptable to the investor, with an advisable minimum ratio of 1:3.

Trade Examples


  • N/A


  • Entry: 2,505
  • Stop-loss: 2,500 Risk: $5
  • Target: 2,600 Reward: $100 Risk-Reward Ratio: 1:20


  • Entry: 2,575
  • Stop-loss: 2,550 Risk: $25
  • Target: 2,650 Reward: $75 Risk-Reward ratio: 1:3

Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 中文 香港 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
Saving Changes