Commodity Calls

Resistances cap upside in MCX Aluminium

Gurumurthy K BL Research Bureau | Updated on January 09, 2018

The aluminium futures contract on the Multi Commodity Exchange (MCX) has reversed higher after hitting a low of ₹133.9 per kg on last Tuesday. This rebound seems to be losing momentum as the contract has come-off the highs slightly again on Monday after touching ₹137.1 recently. It is currently trading at ₹136.9/kg.

Indicators on the charts suggest that the contract is likely to reverse lower again. A strong resistance isat ₹138, which is likely to cap the upside in the near-term. The 21-day moving average has just crossed below the 55-day moving average.

This is a negative signal indicating that the upside could be limited. These indicators increase the likelihood of the contract falling to ₹133 — the100-day moving average support — in the coming days. If the contract manages to bounce up from ₹133, it can move up again to ₹136-137 levels again. But if the contract breaks below ₹133, the current down-move can extend up to ₹132 or ₹131.

Short-term traders can go short at current levels and also on rallies at ₹138. Stop-loss can be placed at ₹139.75 for the target of ₹133.5. Revise the stop-loss lower to ₹136 as soon as the contract moves down to ₹134.5

The outlook will turn positive only if the contract breaks decisively above ₹138. Such a break will ease the downside pressure. It will also increase the possibility of the contract rallying to revisit ₹141 and ₹142 levels.

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

Published on November 27, 2017

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