Commodity Calls

Bet short on MCX aluminium futures

Akhil Nallamuthu | | Updated on: Jun 01, 2022

MCX futures could slip below the support at ₹225

The aluminium futures on the Multi Commodity Exchange (MCX) has been on a downtrend since early March this year from about ₹325. The latest leg of the decline resumed at around ₹300 in the final week of March.

But after hitting a low of ₹228.2 about three weeks ago, the contract rallied. As expected, the rise looks like a corrective upside movement and that means, the contract can begin the next round of the downtrend.

Since the beginning of the current week, the contract is showing bearish signs. It is currently trading around ₹235 compared to last week’s close of ₹241.55. Going forward, it is likely to fall further but this time, it will most likely drop below the support at ₹225.

Fresh medium-term uptrend

Potentially, the contract can decline towards the support band of ₹200-205. But this is strong support where it is highly likely that aluminium futures could establish a fresh medium-term uptrend where it might appreciate to retest ₹250 levels.

Considering the above factors, traders can initiate fresh short positions at the current level of ₹235 and add more shorts when the price rises to ₹250. Initial stop-loss can be placed at ₹268. Once the price drops below ₹225, revise the stop-loss down to ₹245.

Further, tighten it to ₹230 when the futures drop below ₹210. Liquidate all the shorts at ₹205. Thereafter, fresh trades can be decided based on how the contract reacts to the support at ₹200.

Published on June 01, 2022
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