Commodity Calls

MCX-Aluminium slips below key level

Akhil Nallamuthu BL Research Bureau BL Research Bureau | Updated on October 21, 2019

The price of October futures contract of Aluminium seems to have broken below the key level at ₹133.5; however, the breakdown is not decisive. But the movement in price clearly suggests a bearish bias, which might further drag the contract down. The decline, which began from the resistance of ₹136, will be considered as a lower high, characteristic of a bear trend. The daily relative strength index and the moving average convergence indicator remain flat, showing no signs of recovery.

On the back of existing weakness, if the contract depreciates further, the bears would gain traction and the price could weaken towards ₹130. This will confirm a lower low, opening the doors for the contract to depreciate to ₹128.5 in the near term. In an alternative scenario, which seems less likely given the prevailing price action, an appreciation from the current levels will face a stiff resistance between ₹135 and ₹136. Only a break beyond ₹136 can be considered as a significant step towards trend reversal in favour of bulls.

Referring to the global price in the three-month rolling forward contract of Aluminium in LME, the price has recovered, unlike in the domestic market. It currently tests the 21-day moving average at $1,738 as the contract is attempting to recover. If the recovery continues, it will face a considerable hurdle at $1,750. Above that level, the sentiment might tilt in favour of the commodity and the contract price might rise to $1,782. However, weakness from the current price might drag the contract towards the support band between $1,700 and $1,712.

Trade strategy

The commodity is trading marginally below the key level of ₹133.5, and the possibility of a recovery looks bleak. Hence, traders can approach with a bearish bias and sell MCX-Aluminium October futures contract on rallies with a stop-loss at ₹137. Stick to the stop-loss level strictly as there are chances of a price recovery in the global market.

Published on October 21, 2019

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