MCX-Aluminium may test support zone in near term

The aluminium futures contract on the Multi Commodity Exchange extended its rally for the second consecutive week. The contract broke the key resistance level of ₹130a kg and marked a high of ₹134.4 on Thursday. However, it failed to sustain higher and fell from this high giving back some of the gains made during the previous week. It is currently trading at ₹132 .

Key support is in the ₹130-₹129 region. The contract can dip to test this support zone in the near term. But whether it manages to reverse higher from there or not will decide the next leg of move for the contract. A strong upward reversal from the ₹130-129 support zone will be positive. It will keep the overall uptrend intact. A rise to ₹134 is possible once again in such a scenario.

Further, a strong break and a decisive weekly close above ₹134 will boost the momentum. Such a break will increase the likelihood of the contract rallying to ₹140 or even ₹145 over the medium term.

Short-term traders with a high-risk appetite can go long if the contract reverses higher from the ₹130-129 support zone. Stop-loss can be placed at ₹127.5 for the target of ₹135. Revise the stop-loss higher to ₹131 as soon as the contract moves up to ₹133.

On the other hand, if the contract declines below ₹129, the selling pressure might intensify. The contract can fall to ₹127 initially. Further break below ₹127 will increase the possibility of the contract extending its fall to ₹125.

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