The Aluminium futures contract on the Multi Commodity Exchange (MCX) has been stuck inside the ₹137-141 a kg sideways range for the third consecutive week. Within this range, the contract tested the upper end of the range by making a high of ₹141.4 on October 9. The contract fell-back sharply thereafter to test the lower end of the range and made a low of ₹136.8 on Friday. It has managed to bounce higher from this low and is currently trading at ₹138/kg.
As long as the contract manages to sustain above ₹137, the sideways range will remain intact. In such a scenario, a rally to ₹141 – the upper end of the range is likely in the coming days.
A breakout on either side of ₹137 or ₹141 will determine the next trend for the contract. Traders can stay out of the market until the range breakout gives a clear cue on the next trend.
A strong break above ₹141 may boost the momentum. In such a scenario, the contract can move up to test the key long-term resistance level of ₹143. A pullback from there can take the contract lower to ₹141 and ₹140. A further break below will see the corrective fall extending to ₹139 and ₹137 thereafter.
On the other hand, if the MCX-Aluminium futures contract breaks the current range below ₹137, it can come under renewed pressure. Such a break will increase the likelihood of the contract falling to ₹135 or even ₹132 thereafter.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.