Technical Analysis

MCX-Aluminium in a consolidation phase

Akhil Nallamuthu BL Research Bureau | Updated on March 31, 2020 Published on April 01, 2020


The price of aluminium futures in Multi Commodity Exchange (MCX) has been largely flat since the beginning of the year. The April futures contract of Aluminium mini i.e. alumini did not witness much volatility and during the past two weeks, it has been trading in the narrow band between ₹132.8 and ₹135.2.

Though the contract is largely trading flat, the price remains below both 21- and 50-day moving averages (DMAs). The daily Relative strength Index (RSI) is flat but remains below the midpoint level of 50 and the Moving Average Convergence Divergence (MACD) indicator in the daily chart is in the negative region. These factors indicate that the contract is exhibiting bearish bias.

Despite bearish indications, the contract might not decline. Because the contract is now trading in a range and the price should either breach ₹132.8 or ₹135.2 to establish the next leg of trend. If the contract breaches the lower limit of the range at ₹132.8, it may find support at ₹130; below that level it might retest previous low at ₹128.2. But if the contract breaks out of the upper limit of the range at ₹135.2, it has an immediate hurdle at ₹136.4, where 21- and 50-DMAs coincides. Above that level it can rally to ₹140.

On the global front, the price of three-month rolling forward contract of primary aluminium in London Metal Exchange (LME) continues to be in a downtrend. Last week, it breached the support at $1,600 and the downtrend looks intact; the likelihood of further decline is more. On the downside, the contract has a considerable support at $1,500, which could provide cushion.

Trade strategy

As the price trend of Aluminium is bearish globally, it can weigh on the contract price in MCX as well. But it has a support at ₹132.8. So, traders can sell the contract with a stop-loss at ₹135.2 if the price falls below ₹132.8.

Published on April 01, 2020

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