Aluminium prices are attempting to recover after falling sharply last week. The aluminium futures contract on the Multi Commodity Exchange (MCX) has risen back well from the low of ₹217.15 per kg. It is currently trading at ₹221 per kg.
Outlook
The bounce back from around ₹217 this week is significant, close to the 200-day moving average support at around ₹217.50. A short-term trend line support is also poised around this level. So it is important for the contract to see a strong follow-through rise in the coming days in order to ease the downside pressure.
Key resistance is in the ₹223-224 region. The contract has to breach ₹224 decisively to bring back the bullishness. Only then will a rise to ₹230-235 come back into the picture.
Failure to breach ₹224 and a reversal from there can drag the contract down to ₹220-217 again. That, in turn, will keep alive the danger of the contract breaking below ₹217. If this break happens, then the MCX aluminium futures contract can fall to ₹214 and ₹212 going forward.
Trade strategy
We expect the resistance at ₹224 to hold in its first test. Traders with high risk appetite can go short on a rise at ₹223. Keep the stop-loss at ₹226. Trail the stop-loss down to ₹221 as soon as the contract falls to ₹219. Move the stop-loss further down to ₹220 when the price touches ₹218. Exit the short positions at ₹217.