Technical Analysis

MCX-Aluminium in consolidation phase

Akhil Nallamuthu BL Research Bureau | Updated on April 13, 2020 Published on April 14, 2020

The April futures contract of aluminium mini, that is, Alumini on the Multi Commodity Exchange (MCX) has been moving sideways in the band between ₹132.6 and ₹135.2 for almost a month. The 21-day moving average (DMA) is at ₹135, making the price level a considerable resistance.

Year-to-date, the contract has moderated by about 2.2 per cent and is currently trading at ₹133.2, after marking a high of ₹143.75 in mid-January. Going ahead, until the contract breaches either of the limits of the range, the next leg of trend cannot be confirmed.

As the price has been flat, the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) on the daily chart remains horizontal. But the RSI is below the mid-point level of 50 and the MACD is in the bearish zone — an indication of a downward bias.

If the contract breaches the lower limit of the range at ₹132.6, it might retest the previous low at ₹128.2. A break below that level can drag the contract to ₹125. But if the contract breaches the upper limit of the range at ₹135.2, where the 21-DMA coincides, it can rally to ₹136.8 — the 50-DMA. A breakout of that level can take the contract to ₹140.

On the global front, the price of three-month rolling forward contract of primary aluminium on the London Metal Exchange (LME) continues to be in a bear trend. Extending the downtrend, the price has slipped below $1,500 earlier this month. As long as the contract remains below that level there is little scope for recovery.

Trading strategy

The global trend of the metal is weak, which can weigh on the futures contract on the MCX. But the trend of MCX-Alumini has been largely flat and it has a support at ₹132.6. So, traders can sell the contract with stop-loss at ₹135.2, if the price falls below ₹132.6.

Published on April 14, 2020

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