For nearly a month, the price of aluminium futures has been on a fall. The decline has been sharp and steady and over the past month, the contract has lost nearly 12 per cent. The April aluminium futures closed at ₹234.15/kg on Monday.
The price action shows that there have not been any signs of a reversal in trend and the momentum is definitely with the bears. However, aluminium futures has a strong base at ₹230.
If the bears can drag the contract below this level, we can see the price falling to ₹218 and ₹208, notable support levels below ₹230.
On the other hand, if aluminium futures see a recovery, it can face resistance at ₹238. A breakout of this gives it some positivity. So, a rally past ₹238 can lift the contract to ₹248, a resistance. Subsequent resistance is at ₹256.
So, overall, as it stands, the next leg of trend depends on whether aluminium futures will breach the support at ₹230 or the resistance at ₹238 first. Note that there is a possibility of the contract consolidating for some time before the breakout.
Trade strategy
Stay out for now. Initiate fresh trade based on the direction of the break of ₹230-238 range.