The continuous futures of aluminium on the MCX (Multi Commodity Exchange) has been on a downtrend since early March this year, after reversing lower on the back of resistance at around ₹325. Towards the end of June, the downtrend lost a bit of momentum and started to consolidate. Until last week it was oscillating in the range of ₹205-215.
Last week, the bears gathered momentum and pulled the contract below support at ₹205. This has turned the outlook negative and indicates that the bears have regained strength. Therefore, the probability of a further decline is high, with the nearest support at ₹186. Subsequent support is at ₹170.
We forecast aluminium futures to depreciate to ₹186 within a couple of weeks. If this level is breached, the price could touch ₹170.
Strategy: Consider initiating fresh short positions at the current level of ₹200. If there is a corrective rally to ₹210, add more shorts and place stop-loss at ₹220.
When the contract touches ₹186, liquidate half of the shorts and tighten the stop-loss to ₹200. Liquidate the remaining shorts when the price falls to ₹170.
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