Aluminium futures on the Multi Commodity Exchange (MCX) fell off the resistance at ₹210 last Friday. The decline continued and the contract is now trading around ₹204. Note that, since May, the price has been fluctuating between ₹204 and ₹210. So, the contract is now testing the bottom of the range.

In case aluminium futures invalidates ₹204, there is a support at ₹200. A breach of ₹200 can intensify the sell-off where the price could decline to ₹186. Although ₹194 is a support, it is a minor one and may not be able to arrest the fall.

On the other hand, if there is a rally on the back of the support at ₹204, the contract will most likely rise towards the range top at ₹210. A breakout of this level can turn the outlook positive and can lift aluminium futures to ₹215 or even ₹218.

Trade strategy

Even as aluminium futures faced considerable sell-off over the past few sessions, it is now trading near the support at ₹204. Since there is another good support at ₹200, we do not recommend short positions now.

So, wait for now and go short after the support at ₹200 is taken out. Target and stop-loss can be at ₹186 and ₹205 respectively.

That said, traders with high-risk appetites can buy aluminium futures now at ₹204. Keep stop-loss at ₹200 and look for a target of ₹210. If the stop-loss of this trade is triggered and if the support at ₹200 is breached decisively, consider short positions as mentioned above.