Aluminium prices fell sharply last week. The prices have been under pressure over the last month. The Aluminium Futures contract traded on the Multi Commodity Exchange (MCX) fell over 3 per cent last week, breaking below the psychological ₹200 mark.
Last week, in this column, we said that ₹199.50 is a key support, and the contract can bounce back from there. That view has gone wrong. The MCX Aluminium futures contract is currently trading at ₹194.80 per kg.
The fall below ₹200 has turned the outlook bearish. Strong resistance is in the broad ₹199-₹201 region. A decisive past ₹201 is needed to turn the outlook bullish again. But that looks difficult, as seen from the price action on the charts. As such, any bounce from here can be capped by the ₹199-₹201 resistance zone.
Support is at ₹192.80. A break below it can drag the contract down to ₹189-₹188.80.
From a medium-term perspective, ₹189-₹188.80 is a crucial support zone. The chances of a bounce from this support zone are very high.
The stop-loss on the long positions recommended last week has been hit. Traders can go short now. Accumulate more shorts on a rise at ₹198.50 and ₹200. Keep a stop-loss at ₹202. Trail the stop-loss down to ₹193 as soon as the contract moves down to ₹192. Move the stop-loss further down to ₹191.50 when the contract touches ₹190.50. Exit the short positions at ₹189.50.