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Aluminium futures on the Multi Commodity Exchange (MCX) have been on the decline over the past month. The price level of ₹227 successfully resisted the bulls, leading to a fall in price.
Currently trading at around ₹206, the contract is trading below a rising trendline support. This indicates that the trend is turning bearish. However, the contract has support at ₹205 and until this level holds, the risk for short positions is higher. Because the bulls might capitalise this demand zone and push prices up.
If the support at ₹205 is breached, the contract will witness another leg of downtrend, potentially to the support region of ₹190-186.
For aluminium futures to negate the bearish bias, it should move above the hurdle at ₹214.
Trade strategy
We suggest staying away for now. Go short on aluminium futures, if it breaks below support at ₹205. Keep stop-loss at ₹212. When the contract touches ₹195, tighten the stop-loss to ₹202. Book profits at ₹190 as the contract might bounce off the support band of ₹190-186.
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