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The resistance at around ₹127 per kg in the Aluminium futures contract on the Multi Commodity Exchange (MCX) has held very well in the past week and has halted the short-term uptrend.
The contract made a high of ₹128.25/kg last Tuesday and has come off from there. It is currently trading at around ₹123. The recent downward reversal signals the beginning of a corrective fall in the contract.
The 38.2 per cent Fibonacci retracement support is at ₹123. If the contract manages to sustain above this support, a bounce-back to ₹127 and ₹128 can be seen in the coming days.
In such a scenario, a range bound move between ₹123 and ₹128 is possible in the near term.
A breakout on either side of ₹123 or ₹128 will then decide the next leg of movement for the contract.
On the other hand, if the contract declines below ₹123 decisively, it can extend the corrective fall to ₹121 or ₹120 — the 50 per cent Fibonacci retracement and the 21-day moving average supports, respectively. The presence of these two supports makes the ₹121-₹120 region a strong short-term support that might halt the corrective fall.
A subsequent reversal from this support zone may lift the contract to ₹125 or ₹128 once again.
A strong break and a decisive close above ₹127 is needed for the contract to gain fresh momentum.
Such a break can take it higher to the next target of ₹130.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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