The aluminium futures contract traded on the Multi Commodity Exchange (MCX) has been trading in ranges. It has been volatile between ₹101 and ₹114 a kg since March last week.

A UK court ruling in March against the new warehouse queuing rules on the London Metal Exchange took the MCX-aluminium futures contract price sharply higher from the low of ₹101.4 in March.

Following this 12.4 per cent rally, the contract gave back all its gains and fell to a low of ₹101.25 on May 20. However, increasing concern in the market that Indonesia’s mineral ores export ban could affect the aluminium market triggered a price reversal from the May low of ₹101.25. This reversal is offering short-term traders an opportunity to go long in the MCX-aluminium futures contract.

Short-term view: The short-term outlook is bullish. The contract is reversing from the support at ₹107.15.

Technically, this bounce has happened from just above the 50 per cent Fibonacci retracement level at ₹107. This keeps the short-term uptrend since May intact. Immediate support for the contract is at ₹108.6 – the 200-day moving average and then at ₹107.5 and ₹107 where the 55- and 21-day moving averages are positioned. The outlook will remain bullish as long as the contract trades above ₹107.

Traders with a short-term perspective can initiate fresh long position now. Stop-loss can be kept at ₹107.3 for the target of ₹112.5

Medium-term view: MCX-aluminium futures contract has been ranged between ₹101 and ₹114 over the medium-term. The probability is now high for the contract to move higher towards the upper end of this range and test ₹114 in the coming weeks.

A breakout on either side of ₹101-114 will determine the ensuing trend. Breach of ₹114 can take the contract higher to ₹117. On the other hand, decline below ₹101 can drag it lower to ₹97. A break below ₹101 looks less probable since technically this level is a very strong support for the contract.

A bullish breakout above ₹114 is more likely in the medium-term.

Related Topics
comment COMMENT NOW