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The December futures contract of Aluminium on MCX established an uptrend in early October as it began to rally from about ₹142. Nonetheless, the contract began to consolidate in November-end where it was fluctuating between ₹162 and ₹165.
However, on Monday, the contract broke out of the range, indicating that the uptrend has gained steam. Substantiating the bullish outlook, the daily relative strength index is showing a fresh uptick following the latest breakout. However, one need to be cautious as the indicator is approaching the over-bought territory even though there are no signs of a trend reversal. The moving average convergence divergence indicator on the daily chart remains in the positive territory. The price is well above the 21-day moving average.
Considering the current chart set-up, the contract can be expected to advance towards ₹170 in the near-term. A breakout of this level can potentially take the price to ₹175. In case of the contract undergoes correction, ₹165 can be the nearest support. Subsequent support is at ₹162. Notably, a breach of this level can turn the short-term outlook negative.
On the global front, the three-month rolling forward contract of aluminium on London Metal Exchange (LME) has recently breached the key barrier of $2,000 and hints at further appreciation on price.
Given the above factors, traders can be bullish and initiate fresh long positions in declines with stop-loss at ₹162 and look for a potential target of ₹175.
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