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MCX-Aluminium (₹140)
The August futures contract of Aluminium on Multi Commodity Exchange (MCX) rallied last week after taking support at ₹137.5 but stopped short of breaching the resistance at ₹142. On the daily chart, it can be observed that the contract has largely been consolidating between ₹137 and ₹142 since early June. So, unless either of these levels are taken out, the next leg of trend cannot be confirmed.
Even though the price is moving in a sideways trend, there are few indications that are favourable for the contract. Like the price is now above the 21-day moving average (DMA); also, the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) indicators on the daily chart are signalling positive signs. The RSI is above the midpoint level of 50 and is showing a fresh uptick and the MACD, which has been in a downward trajectory, is now turning upward and stays in the bullish region.
If the contract picks up momentum and rises from current level and rallies above the resistance at ₹142, the outlook will turn positive where it can advance to ₹145 and possibly to ₹150. On the other hand, if the contract weakens, it can find support at ₹137. A breach of this level can turn the near-term stance bearish, where the contract might fall to ₹134.
Looking at the global trend, the price of three-month rolling forward contract of primary aluminium on London Metal Exchange (LME) has been in an uptrend since mid-May. Currently hovering at the resistance of $1,700, a breakout can lead to a strong rally.
Trade strategy
The MCX contract is showing positive signs and the positive outlook is supported by the trend globally, as indicated by the price pattern of LME contract. However, the MCX-Aluminium has a roadblock at ₹142. Given that, traders can initiate fresh long positions with stop-loss at ₹139 if the contract decisively breaks out of ₹142.