Commodity Calls

MCX-Aluminium likely to move up

Akhil Nallamuthu BL Research Bureau | Updated on January 20, 2020

The January mini futures contract of aluminium, ie, Alumini on the MCX started to trend lower in September last year and the downtrend lasted till late November. During that period the contract tumbled to ₹130 from ₹151, losing nearly 14 per cent.

However, the contract reversed the trend from ₹130 and has been on a rise since then. The contract rallied to ₹142.3 and currently, it is tracing sideways path between ₹139.5 and ₹142.3. The 23.6 per cent Fibonacci retracement level of the recent uptrend coincides at ₹139.5, making it an important level. And, at ₹139 lies the 21-DMA. Thus, the contract will be bullish until it remains above ₹139. Corroborating this, the daily relative strength index (RSI) is showing a fresh uptick. But the Moving Average Convergence Divergence (MACD) indicator shows that bulls have lost some steam of late.

However, further appreciation in price is likely since the recent trend is bullish and the contract has bounced from the support at ₹139.5. If the contract rallies past the upper boundary of the range at ₹142.3, it can test the previous high at ₹151 in the near term. On the other hand, if the contract declines and breaches the key support at ₹139.5, it might descend to ₹136.2, where the 50-DMA coincides.

On the global front, the price of three-month rolling forward contract of Aluminium on the LME continues to consolidate in the range between $1,788 and $1,835. The next leg of trend will be confirmed only if the price gets out of this range. Resistance above $1,835 is at $1,860 whereas support below $1,788 is at $1,780.

Trading strategy

As the price of Aluminium may resume the uptrend during the upcoming days, one can take bullish view on MCX-Alumini futures contract. Hence, traders can initiate fresh long positions with stop-loss at ₹136.

Published on January 21, 2020

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