MCX-Aluminium lacks momentum

Gurumurthy K | Updated on January 14, 2019

The Aluminium futures contract on the Multi Commodity Exchange of India (MCX) seems to be lacking strength. The corrective bounce from the low of ₹124.75 made on January 2 seems to have lost its momentum. The contract inched higher in the initial part of last week and made a high of ₹132.1 per kg on Wednesday. However, the contract has reversed lower thereafter and has come-off from the high. It is currently trading at ₹129 per kg.

The price action on the chart leaves the bias bearish. Technically, the 21-day moving average resistance at ₹132 has halted the corrective rally last week. This leaves the broader downtrend intact. Immediate support is at ₹128. A break below it can drag the contract lower to ₹125. A further break below ₹125 will then increase the likelihood of the contract extending its downmove to ₹123 or even ₹120.

Trading strategy

Traders with high-risk appetite can go short at current levels and also on rallies at ₹131. Stop-loss can be placed at ₹133 for the target of ₹122. Revise the stop-loss lower to ₹128 as soon as the contract moves down to ₹126.

Global trend

The resistance at $1,890 per tonne for the Aluminum (3-month forward) contract on the London Metal Exchange (LME) has limited very well. The contract made a high of $1,885 last week and has come-off from there. It is currently trading at $1,836. A dip to test the $1,800-$1,785 support zone is likely in the near term. A break below $1,785 can drag the contract lower to $1,760 and $1,740 in the short term.

On the other hand, if the LME-Aluminum contract manages to sustain above the $1,800-$1,785 support zone, a bounce-back move to $1,900 is possible. In such a scenario, a range-bound move between $1,785 and $1,920 can be seen for some time.

Note: The recommendations are based on technical analysis. There is a risk of loss in trading.

Published on January 14, 2019

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