Technical Analysis

MCX-Aluminium consolidates with bearish bias

Akhil Nallamuthu BL Research Bureau | Updated on February 24, 2020 Published on February 25, 2020

The March Aluminium mini futures contract — Alumini — on the MCX seems to be extending its two-week sideways trend. The boundaries of the range are ₹136.8 and ₹139.4.

Notably, the price ruling below 21- and 50-DMAs indicates a bearish bias. The daily RSI is flat but lies below the mid-point level of 50. Besides, the Moving Average Convergence Divergence (MACD) on the daily chart is also flat within the bearish zone. Though these factors show a bearish inclination and the major trend of the metal is bearish, the contract should break below the support at ₹136.8 to confirm further decline in price.

As long as the contract trades below ₹140 it will have bearish bias. So, going forward, if the contract faces fresh downward pressure and breaks below the lower boundary of the range at ₹136.8, it can be dragged to ₹133.8. A break below that level will confirm a lower low on the daily chart which can intensify the sell-off. In such a scenario, the contract might decline to ₹131.7. On the other hand, if the contract breaks out of the resistance at ₹140, it can advance to ₹143 in the near-term. If it breaches that level, it can possibly rally to ₹146.

On the global front, the price of three-month rolling forward contract of Aluminium on the London Metal Exchange (LME) has been sluggish during the past week. But the overall trend remains bearish and price is below the 21-day moving average indicating a weak outlook. Until price remains below $1,750, the contract can continue to face selling pressure.

Trading strategy

The contract is below the important level of ₹140 and the overall trend remains bearish. However, a break below ₹136.8 should be a prerequisite to short the contract. So, traders can sell the March MCX-Alumini below ₹136.8 with stop-loss at ₹143.

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Published on February 25, 2020
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