Commodity Calls

MCX-Aluminium likely to extend rally

Akhil Nallamuthu BL Research Bureau | Updated on December 30, 2019 Published on December 31, 2019

The spot price of aluminium on the MCX breached the crucial resistance at ₹136. Thus, it has moved out of the range between ₹128.5 and ₹136, within which it had been oscillating since the beginning of October. The metal might have reversed the trend and so the spot price is likely to continue to head upwards in the coming days.

Following the spot price, the January futures contract of aluminium mini, ie, alumini, on the MCX has been advancing since past two weeks. Last week, the contract broke out of the important resistance at ₹135.6 with considerable volume, making higher highs on the daily chart. Also, it has rallied past the 50-DMA, increasing the possibility of a medium-term uptrend. The daily Relative Strength Index continues to rise in tandem with the contract price and the Moving Average Convergence Divergence on the daily chart indicates substantial bullish momentum.

Considering above factors, the contract can be expected to retain its bullish momentum going forward. The nearest hindrance for the contract is at ₹139.25 and above that level, the resistance is at ₹143.2. The resistance at ₹143.2 is coincided by 61.8 per cent Fibonacci retracement level of the previous bear trend, making it a significant level. Alternatively, if the contract weakens, ₹135.6 will act as a good support where 50-DMA coincides.

The three-month rolling forward contract of Aluminium on the London Metal Exchange too rallied during the past week and closed at $1,830, a critical resistance level. The price action is hinting a bullish bias, increasing the chance for further appreciation. Above $1,830, the resistance is at $1,860. On the downside, the contract has a support band between $1,790 and $1,800.

Trading strategy

Following the breakout, the January futures contract of Alumini has entered the bull trend. Hence, traders are recommended to initiate fresh long positions on dips with stop loss at ₹134.

Published on December 31, 2019
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