The continuous contract of aluminium on the Multi Commodity Exchange (MCX) began its latest leg of rally after taking support at around ₹200 in early November last year.
However, the contract, after hitting a three-month high of ₹250.25 last week, has moderated to the current level of ₹240. Nevertheless, the uptrend remains intact, and the contract is likely to resume the rally sooner or later.
Notably, the 20-day moving average lies at around ₹240 offering good support for the bulls. Below this, ₹234 is considerable support and the contract is less likely to slip below this level. Therefore, we expect the resumption of the rally at current levels or on the back of ₹234.
On the upside, the contract could move past the prior high of ₹250.25 and touch the resistance at ₹260 in the short-term. There can be a sideways corrective phase or a corrective decline after the contract hitting ₹260. But if the contract breaks below support at ₹234, expect a correction towards the key support at ₹224. Subsequent support is at ₹215.
Since the bull trend remains valid and the contract has a couple of strong supports from here, one can consider going long. That is, go long at current levels and accumulate when the price drops to ₹234. Place stop-loss at ₹228 initially and tighten it to ₹238 on a decisive break out of ₹250. Exit the longs at ₹260.