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The Aluminium futures contract on the Multi Commodity Exchange (MCX) extended its downmove as expected in the past week to test the crucial support level of ₹136 per kg. The contract fell about 3 per cent from around ₹140 per kg to make a low of ₹135.8 on Friday. It has bounced from this low and is currently trading at ₹136.5 per kg.
The 100-week moving average as well as a trend line support around ₹136 is holding well as of now. Whether the contract manages to sustain above ₹136 and bounce higher or not will determine the direction of next move.
Traders can stay out of the market until a clear trend emerges.
Resistance is in the ₹138-₹140 zone which is likely to be tested if the contract sustains above ₹136 in the near term. A strong break above ₹140 is needed to ease the downside pressure. Such a break will increase the likelihood of the contract moving higher towards ₹143 and ₹145 levels over the short term.
On the other hand, if the MCX-Aluminium futures contract breaks below ₹136 decisively, the downside pressure will increase. In such a scenario, a fall initially to ₹134 is possible. A further break below ₹134 will then increase the possibility of the downmove extending to ₹132 and ₹130 thereafter.
Range-bound on LME
On the global front, the Aluminum (3-month forward) contract on the London Metal Exchange (LME) has been stuck in a sideways range between $1,925 and $1,965 per tonne over the last couple of weeks. It is currently trading at $1,949 per tonne.
A breakout on either side of $1,925 or $1,965 will decide the next move. A break below $1,925 can take the LME-Aluminum contract to $1,900. On the other hand, a break above $1,965 can initially test $1,970. A decisive break above $1,970 is needed to turn the outlook positive. Such a break can target $2,000 thereafter. But a pull-back from the $1,965-$1,970 resistance zone may drag the contract lower to $1,950 and $1,925 levels again.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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