Technical Analysis

MCX-Aluminium extends consolidation phase

Akhil Nallamuthu BL Research Bureau | Updated on April 27, 2020 Published on April 27, 2020

The May futures contract of aluminium on the Multi Commodity Exchange (MCX) has been in a sideways trend for the past one month. It has been fluctuating in a narrow band between ₹131 and ₹136. Currently hovering around ₹133, the contract has lost about 4.7 per cent year-to-date. Though the major trend of the metal is bearish, the next leg of trend will remain uncertain as the contract currently remains within a range.

Though the daily Relative Strength Index (RSI) is flat, it remains below the midpoint level of 50. Against this, the MACD indicator on the daily chart has been exhibiting mild bullishness. However, it stays in the negative region. Also, the price is hovering below both 21- and 50-day moving averages, giving it a bearish inclination.

If the contract breaches the lower boundary of the range at ₹131, it is likely to find support at ₹123.6. A break below that level can drag the contract to ₹119. On the other hand, if the contract breaks out of the upper boundary of the range at ₹136, it will face a hurdle at ₹140. Beyond that level, it can rise to ₹143.

 

On the global front, the price of three-month rolling forward contract of primary aluminium on the London Metal Exchange (LME) has been recovering since the beginning of the month. The contract remains above $1,500 and if it sustains above it, the price might rise further. But if the price falls below $1,500, it can result in a fresh downtrend, which can potentially weigh on the price of MCX contract as well.

Trading strategy

The futures contract on the MCX remains in the consolidation range. Hence, traders can stay on the fence until either of ₹131 or ₹136 is taken out. On the back of the major downtrend, if the price slips below ₹131, traders can initiate fresh short positions with stop-loss at ₹136.

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

Published on April 27, 2020

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