Commodity Calls

MCX-Aluminium tests a key support

Gurumurthy K BL Research Bureau | Updated on December 17, 2018 Published on December 17, 2018

Traders can stay out of the market until a clear trend and a trade signal emerges.

The aluminium futures contract on the Multi Commodity Exchange of India (MCX) fell in the past week. The contract failed to sustain above ₹140 per kg and fell sharply after making a high of ₹143 per kg on December 11. The contract has tumbled 4 per cent from the high and is currently trading at ₹137.5 per kg.

A key support is near current levels at ₹137. Whether the contract sustains above this support or not will decide the direction of the next move. A bounce from ₹137 can take the contract higher to ₹140. A strong break and a decisive close above ₹140 is needed for the contract to gain momentum. Such a break can take the contract higher to ₹144 and ₹146. Inability to breach the ₹144-₹146 resistance zone can pull the contract lower to ₹141 and ₹140 again. But a further decisive break above ₹146 will then increase the likelihood of the up-move extending to ₹149 and ₹150.

On the other hand, if the MCX-Aluminium futures contract breaks below ₹137, the downside pressure would increase. The contract can initially target ₹134. A strong break below ₹134 will increase the possibility of the contract tumbling towards ₹130 and ₹128 in the coming weeks.

Traders can stay out of the market until a clear trend and a trade signal emerges.

Global trend

The aluminium (3-month forward) contract on the London Metal Exchange (LME) is retaining its sideways movement. The contract has been range-bound between $1,900 and $2,00 per tonne over the last few weeks. Within this range, the contract fell after making high of $1,960 last week. It is currently trading at $1,926 per tonne.

Immediate support is at $1,900. If the LME-Aluminum contract manages to bounce from this support, the sideways range movement will remain intact. In such a scenario, the contract can rally to $2,000 in the coming weeks. But if the contract breaks decisively below $1,900, it can fall initially to $1,885. A further break below $1,885 will then increase the possibility of the downmove extending to $1,850.

Note: The recommendations are based on technical analysis. There is a risk of loss in trading.

Published on December 17, 2018
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