Technical Analysis

MCX-Aluminium in consolidation phase

Akhil Nallamuthu BL Research Bureau | Updated on December 16, 2019 Published on December 17, 2019


The spot price of Aluminium on the MCX, which has been in a downtrend since April, seems to be in a consolidation phase now. The price is oscillating within broad range between ₹128.5 and ₹136. Thus, the metal can establish the next leg of trend only if it moves out of this range.

The December futures contract of Aluminium on the MCX was on a downswing, like the spot price. But of late, the price action shows that the bears may have lost momentum and the price has started to move sideways in the band between ₹130 and ₹135. The MACD is showing signs of recovery as it points an upward trajectory, indicating a potential to rally. But for the rally to sustain, the contract should breakout of ₹135 rather than consolidating at current levels as prolonged consolidation might change the tide against the metal.

If the contract moves beyond the upper boundary of the range at ₹135, it can rally towards the resistance band between ₹138.8 and ₹140.5. A break above that level can turn the medium-term trend of the commodity bullish where the subsequent resistance is at ₹145. However, if the contract breaks below the lower boundary of the range at ₹130, it can decline to ₹125.

The three-month rolling forward contract of Aluminium on the LME is also stuck between two key levels at $1,745 and $1,790. On observing the chart, one can find that the price is forming a contracting pattern on the daily chart by registering lower peaks and higher lows. The key levels to watch are $1,730 and $1,820.

Trading strategy

Traders are advised to stay on the sidelines until the December futures moves out of the range between ₹130 or ₹135. Until then, traders can adopt range-bound trading strategies. The direction of the break can confirm the next leg of the trend.

Published on December 17, 2019
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