Commodity Calls

MCX-Aluminium can be range bound with a bearish bias

Gurumurthy K BL Research Bureau | Updated on July 30, 2018 Published on July 30, 2018

The Aluminium futures contract on the Multi Commodity Exchange (MCX) inched higher in the initial part of last week. However, the positive sentiment was short-lived. The contract made a high of ₹144.55 per kg and has reversed lower from there. It is currently trading at ₹141 per kg.

A key support for the contract is at ₹138 and resistance is at ₹147 - the 21-week moving average. The contract can remain range bound between ₹138 and ₹147. A breakout on either side of ₹138 or ₹147 will decide the next trend.

The downside pressure will ease if the contract manages to breach ₹147 decisively. Such a break can take the contract higher to ₹151 initially. Further break above ₹151 will then increase the likelihood of the contract extending its rally to ₹155 or even higher levels.

But, the price action on the chart leaves the possibility less of the contract breaking above ₹147 in the coming days. The 21-day moving average at ₹142 has been capping the upside in the contract over the last few weeks. As long as the contract trades below this hurdle, there is a strong likelihood of it declining below ₹138 in the coming days.

A break below ₹138 will bring renewed pressure on the contract. Such a break can drag the MCX-Aluminium futures contract lower to ₹132 or ₹130 in the short term.

Trading strategy

Traders who have taken short positions last week at ₹144 can hold it and can also accumulate at ₹46. Retain the stop-loss at ₹149 for the target of ₹134. Revise the stop-loss lower to ₹140 as soon as the contract moves down to ₹138.

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

Published on July 30, 2018
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