The Aluminium futures contract on the Multi Commodity Exchange (MCX) has been volatile in the past week. Contrary to our expectation of a fall, last week the contract had reversed higher initially. However, the bounce-back was short-lived and the contract had come-off after hovering below ₹160 per kg for some time. It fell to a low of ₹153.8 on Friday and bounced slightly higher and is currently trading at ₹156 per kg.
The immediate outlook is mixed. A key support is at ₹154 and resistance ₹160. A breakout on either side of ₹154 or ₹160 will decide the next move.
A strong break below ₹154, will increase the downside pressure. Such a break can drag the contract lower to ₹149 or ₹147.5 in the short term. Further break below ₹147.5 will see the down-move extending towards ₹144.
Traders with a high-risk appetite can go short on break below ₹154. Stop-loss can be placed at ₹156 for the target of ₹149. Revise the stop-loss lower to ₹153 as soon as the contract moves down to ₹152.
On the other hand, if the contract sustains above ₹154 levels and a decisive break above ₹160 can gain fresh momentum. Such a break will ease the downside pressure. It will then increase the likelihood of the contract rallying to ₹165 and ₹170 levels going forward.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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