Aluminium futures has so far gained 1.5 per cent this week and is currently trading at ₹246/kg. The chart shows that the trend has been positive since early May.
Although the prevailing price action gives a positive outlook for aluminium futures, there is a notable barrier at ₹248. The 50 per cent Fibonacci retracement of the prior fall coincides at ₹248, making it an important level.
While there might not be a bearish trend reversal, some profit booking at around ₹248, can result in a temporary dip in price.
In case such a correction occurs, aluminium futures might drop to ₹242, a support. At this level, a trendline is likely to coincide, making it a good base. Hence, the downswing might not extend beyond this support.
Going forward, we expect aluminum futures to fall to ₹242, either from the current level of ₹246 or after rising to ₹248. Post this, the contract can begin another leg of fresh rally, possibly lifting the price to ₹256.
Trade strategy
Go long on aluminium futures in case the price softens to ₹242. Target and stop-loss can be ₹256 and ₹236 respectively.
But instead, if the contract rallies from the current level of ₹246 and breaks out of ₹248, traders can consider buying. Target and stop-loss can be ₹256 and ₹244, respectively.