Technical Analysis

MCX-Aluminium faces a key barrier

Akhil Nallamuthu | Updated on November 11, 2019

The aluminium price continued its recovery in the past week. The November futures contract of the metal on the Multi Commodity Exchange of India closed with a gain last week, a second consecutive positive weekly close. Though it is a considerable sign of recovery, the contract needs to close above ₹136 for it to be sustainable. Since it is trading at a supply zone between ₹135 and ₹136 and hovering around the 50-DMA, the price action needs to be monitored closely for its reaction. Factors that are in favour of the contract is the rising daily relative strength index and a positive moving average convergence divergence indicator.

Corroborated by short-term bullishness, if the recovery in futures price manages to break out of ₹136, it will most probably appreciate to ₹141. Also, a decisive close above ₹136 might change the medium-term trend into a bullish one. However, on the back of resistance, if the contract attracts selling, it could weaken to ₹133. Below that level, the support is at ₹130.

After a considerable bull run, which resulted in price breaching above $1,800, the three-month rolling forward contract of aluminium on the LME moderated in the past week. It faces a significant resistance at $1,825, from where the price started to soften. On the downside, it has supports at $1,800 and $1,782. Alternatively, further appreciation from current level will face hindrance at the prior high of $1,825, beyond which there is a resistance around $1,850.

Even though the contract has staged a recovery, the price of MCX-Aluminium futures is facing a strong resistance at current levels. So, fresh long positions can be considered only if the contract decisively closes above ₹136.

But since it is trading at a substantial resistance level, traders with risk appetite can sell the futures contract with tight stop-loss as risk-reward ratio seems to be in favour of short at current levels.

Published on November 11, 2019

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