In this week's commodity dissector, we take a close look at aluminium traded in London Metal Exchange. Its unit is measured in USD/MT. For this technical analysis, LME primary aluminium 3 month rolling forward has been taken. It closed at $1,983, gaining $38.5 or almost 2 per cent on Friday.
Long-term trend remains up for aluminium as long as it trades above its significant long-term band between $1,800 and $1,850 levels. This base band coincides with the 61.8 per cent Fibonacci retracement level of the contract’s prior up-move from its February 2009 low to May 2011 peak.
A strong decline below the aforementioned base band will pull the commodity down to $1,685 and then to $1,600 in the long-term. On the upside, the commodity needs to rally above its key long-term resistance level at $2,400 to reinforce bullish momentum from a long-term perspective and take it northwards to $2,600 and then to $2,800. Next important resistance is pegged at $2,900 levels.
Medium-term view
Ever since peaking out in May 2011 from the peak of $2,803, aluminium has been trending downwards forming lower peaks and troughs. However, after taking support at around $1,830 during June and August this year, the commodity started to move upwards sharply. It then encountered resistance at $2,200 in mid-September, retracing 38.2 per cent Fibonacci retracement of its prior down move. The commodity has been on a short-term downtrend since its September peak of $2,200. It currently faces resistance at $2,030 levels.
A decisive jump above $2,030 will take aluminium higher to $2,100 and then to $2,200. But inability to rally above $2,030 will pull the commodity down to $1,944 and then to $1,900. Only a strong fall below $1,900 will drag the commodity further down to $1,800 in the medium-term.
To alter the commodity's intermediate-term downtrend, it needs to rally beyond $2,315 levels which is the key resistance above $2,200. In that scenario, the commodity can trend higher to $2,400 in the medium-term.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.