Commodity Calls

MCX-Aluminium continues to be under pressure

Akhil Nallamuthu BL Research Bureau | Updated on October 15, 2019

Though the October futures contract of Aluminium has been in a downtrend since the beginning of September, it seems to have been in a consolidation phase currently. The contract has been oscillating between ₹133.5 and ₹136 since the beginning of this month.

The 23.6 per cent Fibonacci retracement level of the previous bear trend lies at ₹135.75, thus making the price band ₹135.75-136 a significant resistance. The major trend remains to be bearish and unless the price breaks out of ₹136 levels, bears are expected to be in control. Only if the contract moves beyond ₹136 there will be a change in the medium-term trend to bullish.

Continuing with the bearish trend, if the contract breaks below ₹133.5 there may be more selling which could pull the price towards ₹130, a key support. On the other hand, if the contract breaks above ₹136, the immediate resistance level is at ₹138 beyond which ₹140 will be a significant hurdle.

Though the three-month rolling forward contract of Aluminium in LME breached an important support at $1,740, there was some recovery in price as the contract rose to $1,745 levels in the past week. However, the price action suggests that the trend is still bearish.

If the weakness persists, the contract could retest the previous low of $1,691.75, below which it can even depreciate to $1,674 levels. Alternatively, if price appreciate from current levels of $1,720, it will face a strong resistance between $1,740 and $1,745.

Trading strategy

The commodity is under a bear grip and until price moves past ₹136, the chances of a recovery is low. Though price action is in a sideways trend, the major trend is bearish, and one can continue to take a bearish bet. Traders can initiate short positions on rallies with a stop-loss above the key resistance of ₹136.

Published on October 15, 2019

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