Aluminium futures on the Multi Commodity Exchange (MCX) have largely been moving in a sideways range since mid-March. Except for a temporary rally to ₹216 in mid-April, the contract has been range bound between ₹204 and ₹212 for nearly two months.
However, aluminium has been outperforming other base metals like copper and zinc for the last two months.
Note that the ₹200-204 price band is helping the contract to avoid a fall, at least until now.
Since aluminium futures have bounced off the above-mentioned support band several times in the last six months, we believe that the probability of a rally is higher as long as it trades near this base. The immediate resistance levels can be seen at ₹212 and ₹216.
Also read: Nifty Today – May 16, 2023: Rally set to extend
A breach of ₹216 can trigger a leg of upside where the contract can see a swift rally to ₹228. On the other hand, if the support at ₹200 is breached, the aluminium futures is likely to be dragged to ₹188.
Trade strategy
From a trading perspective, risk-reward ratio favours long positions. Therefore, we suggest going long on aluminium futures at the current level of ₹206 and add more longs if price dips to ₹202. Place stop-loss at ₹196.
When the contract hits ₹212, exit half of the buys and then tighten the stop-loss to ₹209. Liquidate the remaining at ₹216.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.