Technical Analysis

MCX-Aluminium likely to fall further

Akhil Nallamuthu BL Research Bureau | Updated on November 25, 2019 Published on November 25, 2019

The spot price of aluminium on the Multi Commodity Exchange fell sharply in November to register a fresh eight-month low of ₹134.9. Unless the price breaks above ₹146 decisively, the medium-term trend will remain bearish.

The December futures contract of aluminium on the MCX has been in a downtrend since September. After attempting a recovery in the first week of November, the contract resumed its decline. In the past week, the contract made a fresh low as it breached the support at ₹132.6, opening the door for further decline. The moving average convergence divergence looks weak as it has entered the negative territory and the price continues to stay below both the 21- and 50-day moving averages, indicating a bearish bias.

 

 

The likelihood of the contract weakening further is high. The contract has a minor support at ₹130. Below that level, the support is at ₹127.5. On the other hand, if the contract recovers from the current level of ₹131.7, the support-turned-resistance level of ₹132.6 will act as a hurdle, beyond which it could appreciate to ₹137.7. A breakout of ₹137.7 has the potential to turn the medium-term trend into a bullish one.

While the aluminium price on the MCX has been declining in the past week, the price of the three-month rolling forward contract on the London Metal Exchange, currently at $1,740, has been moving sideways between $1,728 and $1,750. But the recent trend has been bearish and so, the contract will possibly break below $1,728 and decline to the support band between $1,700 and $1,710. On the upside, the contract has resistance at $1,750 and $1,760.

Trading strategy

The price of MCX-Aluminium futures has broken below the important support at ₹132.6 and the contract is expected to weaken further. The bearish trend is also justified by the global trend of the metal. Traders are thus advised to initiate fresh short positions on rallies with stop-loss at ₹135.

Published on November 25, 2019
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