Portfolio

Aluminium may be heading towards consolidation

Akhil Nallamuthu BL Research Bureau | Updated on September 09, 2019 Published on September 09, 2019

The three-month rolling forward contract of aluminium on the London Metal Exchange has been appreciating since the beginning of September.   -  Reuters

The September futures contract of aluminium on the Multi Commodity Exchange opened the week on a flat note at ₹140.1 on Monday. During the previous week, the contract appreciated to ₹141.7 from ₹139.55, but gave up most of its gains towards the end of the week, closing at ₹139.8 on Friday. The contract sold-off from ₹141.7 levels, where the 21-day moving average acts as a resistance.

On Monday, the contract, after making a low of ₹139.3, attracted some buying and moved up to an intermittent resistance at ₹140.4. However, a breakout beyond key resistances at ₹140.4 and ₹141.7 would be necessary for the contract to demonstrate a trend reversal. In such a case, the price action would witness a higher low, potentially an indication of renewed buying interest. But, if the price depreciates and breaks below the support at ₹139.3 as dictated by the major trend, the contract may slump towards ₹138.25 levels in the medium term.

The three-month rolling forward contract of aluminium on the London Metal Exchange has been appreciating since the beginning of September. It bounced from a low of $1,736.5 and is now hovering around an important resistance level of $1,800. If the contract moves past the resistance, there is a high chance of the price appreciating towards $1,835 levels and even to $1,860 and beyond.

On the daily chart, one can spot a potential double-bottom pattern, indicating a trend reversal. The target, as implied by the pattern, is $1,860. However, the pattern will be confirmed only if the price closes above $1,800. On the other hand, if the contract faces more selling at $1,800, the price could move towards $1,755, below which it might retest $1,736.5.

There is a high probability of the price consolidating between ₹139.3 and ₹141.7 in the coming days. Hence, from the perspective of trading, it is better to stay on the fence and watch how the price unfolds. One should wait for the break-out of either of the boundaries of the consolidation range to identify the upcoming trend.

Published on September 09, 2019
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