The upmove in the January futures contract of Aluminium on Multi Commodity Exchange (MCX), which was established in early November, seems to have slowed down.

This is evident from the price action of the contract. While it began to rally from about ₹140 by the end of October, it seems to have been blocked by the resistance at ₹168 in early December.

Since then, it has largely been in a sideways crawl between ₹162 and ₹168.

Because of this, the price has drifted below the 21-day moving average (DMA) and the daily relative strength index has been sliding lower for the past couple of weeks.

Similarly, the moving average convergence divergence on the daily chart is pointing downwards, indicating a potential shift in the direction of the trend.

However, taking price action into consideration, until the contract continues to trade within the price band of ₹162 and ₹168, the direction of the upcoming trend will remain uncertain.

BL28MCXAluminiumcol
 

Global factors

Also, note that the major trend is directionally up. These factors do not warrant an immediate shift to bearish view.

On the global front, too, a similar price pattern can be observed i.e., the three-month rolling forward contract of the metal in the London Metal Exchange (LME) has been in a consolidation mode for the past three weeks. It has been moving within $2,000 and $2,060.

Taking the above factors into account, traders can wait for the contract to breach either ₹162 or ₹168 as the direction of the break will give us credible cues about the next leg of trend.

If the bulls regain strength and help the contract breakout of the obstacle at ₹168, it can be expected to make a similar run that it witnessed in November. Resistance above ₹168 can be ₹175 and ₹180.

But if the price falls below ₹162, the short-term outlook can turn bearish and consequently, contract can drop towards the support at ₹158 – its 50-DMA. Subsequent support can be spotted at ₹155.

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