Aluminium prices have been under pressure since the beginning of the New Year. The Aluminium futures contract traded on the Multi Commodity Exchange (MCX) touched a high of ₹213.45 per kg on January 2. From there the prices have tumbled about 8 per cent. The Aluminium contract is currently trading at ₹197 per kg.

Outlook

The trend is down since the beginning of the month. The downtrend is strong and there is no sign of a reversal yet. So there is room for the MCX Aluminium contract to fall more from current levels.

Key near-term resistances are at ₹199.70 and ₹200.25. Above that, the region between ₹202.30 and ₹202.50 will be the higher and much stronger resistance. The strong fall over the last three weeks leaves the picture weak. As such, we see high chances for the upside to be capped at ₹199.70 or ₹202.25 itself. In case a break above 200.25 is seen, though less likely, we can see an extended rise to ₹202.30-₹202.50.

Support is at ₹193.30, which can be tested first this week. A bounce from there can see a corrective rise to ₹197. However, an eventual break below 193.30 can take the contract down to ₹190.50 in the short-term.

Important to note is that the region around ₹190.50 is a strong long-term trend support. So, the current fall can halt there.

Trade strategy

Traders can go short now. Accumulate on a rise at ₹198.50. Keep a stop-loss at ₹199.80 initially. Trail the stop-loss down to ₹196 as soon as the contract falls to ₹194.75. Move the stop-loss further down to ₹194.50 when the contract touches ₹193.85. Exit the short positions at ₹193.50.

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