The Aluminium futures contract on the Multi Commodity Exchange (MCX) fell as expected to ₹137 per kg last week. However, the down move was short-lived and the contract has managed to rebound after marking a low of ₹136.6 per kg on last Tuesday. The contract has surged about 4 per cent from this low and is currently trading at ₹142. The strong recovery has eased the downside pressure.
Immediate resistance is in the ₹143.5-144 band which is likely to be tested in the near-term. If the contract manages to breach ₹144 decisively, it can gain fresh momentum. Such a break will increase the likelihood of the contract rallying to ₹145 or even to ₹147.
But if it reverses lower after testing the ₹143.5-144 resistance zone, it can fall to ₹137 again. In such a scenario, a range-bound move between ₹137 and ₹144 is possible for some time. A breakout on either side of ₹137 or ₹144 will then decide the next trend.
The contract will come under renewed pressure only if it declines below ₹137 decisively. A strong break below ₹137 will bring fresh selling pressure in the contract. Such a break will then increase the possibility of the contract tumbling to ₹132 or even to ₹130 levels.
Traders can stay out of the market at the moment. Watch the price action for a few days to get a clear cue on the next trend.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.