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The aluminium futures contract on the Multi Commodity Exchange has reversed sharply higher in the past week. The contract tested its key support level of ₹119 per kg on June 26, and has surged over 4 per cent from there.
It is currently trading at ₹124.5 per kg. The 200-day moving average at around ₹120, and a trend-line support at around ₹119, have aided in halting and triggering a reversal in the downtrend that was in place since late May.
The outlook is bullish. A key support is in the ₹124-₹123 region, which is likely to limit the downside in the near term. A rise to ₹126 is likely in the coming days. If the contract manages to breach ₹126 decisively, the upmove can extend to ₹127.5 or ₹128.
The region around ₹130 is a crucial long-term resistance level that had halted the rally that began in November 2015. Whether the contract breaks above this hurdle or not will then decide the next move.
If the contract fails to break above the immediate resistance at ₹126 in coming days, it can fall to ₹124 or ₹123 again.
Such a downward reversal will also mean that the Channel movement in place since March is still intact. It will also keep alive the possibility of the contract falling to ₹120.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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