Technical Analysis

Commodity Call: Buy aluminium January futures

Akhil Nallamuthu | | Updated on: Dec 22, 2021

Despite the sharp decline from the high of ₹262 to ₹203, the medium-term trend remains bullish | Photo Credit: JazzIRT

Go long at current level and accumulate if price moderates to ₹220

The continuous futures contract of aluminium on the Multi Commodity Exchange (MCX) witnessed a sharp decline in price after marking a high of ₹262 in mid-October. It was dragged to register a low of ₹203 in early November. Since then, it was largely oscillating within ₹204 and ₹217.

Stronger, eco-friendly aluminium alloys

Last week, the contract gained enough momentum and broke out of the resistance at ₹217. This has turned the short-term outlook positive. Also, despite the sharp decline from the high of ₹262 to ₹203, the medium-term trend remained bullish. This will stay so as long as the contract stays above the ₹200-mark.

RSI, MACD indicators positive

The RSI and the MACD indicators are showing positive signs as they have entered their respective positive territories. Moreover, the open interest (OI) data indicate a healthy build-up of long positions. That is, the number of outstanding OIs of all active aluminium futures on the MCX went up as price rallied and stood at 3,139 as on Tuesday, compared to 1,820 contracts a fortnight ago.

Aluminium prices may gain next year on demand, supply concerns

The above factors hint at further appreciation in futures price. But the contract could see a minor pull-back before progressing towards the resistances at ₹238 and ₹250. Since there are a limited number of sessions left in the current expiry i.e., December, traders can consider January series for taking fresh positions.

Go long at current level and accumulate if price moderates to ₹220. Place stop-loss at ₹214. When contract touches ₹238, liquidate half of your longs. Then shift the stop-loss to ₹228 and exit the remaining at ₹250.

Published on December 22, 2021
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