Technical Analysis

MCX-Aluminium faces a vital hurdle

Akhil Nallamuthu BL Research Bureau | Updated on June 01, 2020 Published on June 01, 2020

File Photo   -  Reuters

The June futures contract of aluminium on the Multi Commodity Exchange (MCX) went up in the past few trading sessions and ended the week with a gain after posting loss during the preceding two weeks. However, it was not able to rally past the 21-DMA. The contract, currently trading at ₹131.5, is hovering near the 21-DMA.

Though the daily Relative Strength Index (RSI) has been flat, it lies below the midpoint level of 50. But the Moving Average Convergence Divergence (MACD) indicator on the daily chart, though in the negative territory, is showing a slight uptick. Nevertheless, the contract should move beyond 21-DMA and should break out of ₹133 to reverse the trend.

If the contract manages to strengthen above ₹133, it is likely to face a hindrance at ₹137 — the 61.8 per cent Fibonacci retracement level of the previous downswing. Subsequent resistance can be at ₹140. On the other hand, if the contract weakens and descends, it has an immediate support at ₹130. A break below this level will confirm a new low and can result in considerable sell-off. In such a scenario, the price might decline to ₹125, which is a support level.

On the global front, the price of the three-month rolling forward contract of primary aluminium on the London Metal Exchange (LME), which has been in a sideways trend since April, has advanced above the critical level of $1,520. This has opened the door for the rally to extend. The contract can be bullish until it stays above $1,520 and the price appreciation can lift the contract on the MCX as well.

Trading strategy

While the contract on the LME looks set to advance further, the contract on the MCX is facing a critical resistance at ₹133. Hence, traders can initiate fresh long positions if the contract breaks out of ₹133. Stop-loss can be placed at ₹131.

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

Published on June 01, 2020
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