Commodity Calls

Supports can limit the downside for MCX-Aluminium

Gurumurthy K | Updated on March 11, 2019 Published on March 11, 2019

Representative image   -  Bloomberg

A strong break and a decisive close above ₹153 will then boost the momentum

BL Research Bureau

The Aluminium futures contract on the Multi Commodity Exchange of India (MCX) fell in the past week. The contract had failed to breach ₹150 per kg and tumbled over 3 per cent last week. It is currently trading around ₹145 per kg.

Though the near-term view remains negative, series of supports can arrest the pace of fall and also limit the downside in the coming days. Key support is in the ₹143-₹142 region which can be tested in the near term. However, a break below ₹142 looks less probable at the moment. The downside is likely to be limited to ₹140 even if the contract declines below ₹140.

As such an upward reversal from the ₹143-₹142 support zone or from ₹140 can take the MCX-Aluminium contract higher to the crucial ₹152-₹153 resistance region.

A strong break and a decisive close above ₹153 will then boost the momentum. Such a break will then pave way for a fresh rally targeting ₹160 and ₹165 over the medium term.

Trading strategy

Traders with a medium-term perspective can make use of dips to go long at ₹143.5 and ₹142. Stop-loss can be placed at ₹138 for the target of ₹151. Revise the stop-loss higher to ₹145 as soon as the contract moves up to ₹148.

Global trend

The Aluminium (3-month forward) contract on the London Metal Exchange (LME) fell in the initial part of last week and remained stable thereafter. The contract fell from around $1,915 per tonne and is currently trading at $1,872 per tonne.

The contract is retaining its $1,850-$1,930 sideways range. It has been stuck inside this range since mid-January. A breakout on either side of $1,850 or $1,930 will decide the next move.

A strong break above $1,930 will pave way for a fresh rally to $2,000. On the other hand, if the contract declines below $1,850, a fall to $1,800 is possible.

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

Published on March 11, 2019
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