Aluminium prices have been struggling to rise over the last few weeks. The Aluminium futures contract traded on the Multi Commodity Exchange (MCX) has been stuck in a sideways range for about three weeks. The contract has been oscillating between ₹234 and ₹242 per kg for some time now. Within this range, it rose to a high of ₹241.70 last week and has come down from there. The contract is currently trading at ₹237.50 per kg.
Outlook
The near-term outlook is mixed and range bound. However, the broader trend is still down. Strong resistance is in the ₹245-246 region. It can cap the upside if the contract breaks above ₹242.
The broader bias is bearish to break ₹234 in the coming days. Such a break can drag the MCX Aluminium contract down to ₹229-228 initially. A further break below ₹228 will see the contract falling to ₹224-222 eventually.
To avoid this fall, the contract has to breach ₹246 decisively. Only then the bias will turn positive for a rise to ₹260 and higher.
But the price action on the chart indicates that a fall to ₹228 and ₹222 can happen first before a reversal is seen.
Trading strategy
Traders can wait for a rise. Go short at ₹240 and ₹244. Keep the stop-loss at ₹248. Trail the stop-loss down to ₹238 as soon as the contract falls to ₹236. Move the stop-loss further down to ₹235 when the contract touches ₹233. Exit the shorts at ₹230.