Technical Analysis

MCX-Aluminium testing a key support

Akhil Nallamuthu BL Research Bureau | Updated on March 23, 2020


The April futures contract of Aluminium Mini on the MCX, that is, Alumini, has been trading in a sideways trend between ₹134.7 and ₹140 for the past few weeks. Last Thursday, the contract declined sharply and registered a low of ₹128.2 before recovering and closing the day within the range. But the price action is suggesting a bearish bias and currently, the price has inched below the lower limit of the range at ₹134.7.

Substantiating the weak outlook, the daily RSI has slipped below the mid-point level of 50 and continues to trend downward. Also, the Moving Average Convergence Divergence (MACD) indicator on the daily chart is exhibiting a bearish bias as it remains in the negative territory. Notably, the overall trend of the metal is bearish.

On the back of the major downtrend, if the contract closes below ₹134.7 on Monday, it might witness considerable selling pressure. The contract price could retest its previous low of ₹128.2 in the near term. A break below that level can drag the contract to ₹125. On the other hand, if the contract manages to reverse the trend, ₹136.8 can act as a hurdle. Above that level, ₹140 is a considerable resistance.

On the global front, the price of three-month rolling forward contract of primary aluminium on the London Metal Exchange (LME) broke below an important support of $1,650 during the last week. As on Friday, the price was hovering around the important level of $1,600. The overall trend remains bearish and the likelihood of further decline is high.

Trading strategy

The price action of MCX-Alumini on the the daily chart indicates a bearish bias. Since the contract has a support at ₹134.7, fresh short positions can be initiated if the price confirms a daily close below that level. So, traders can initiate fresh short positions with stop-loss at ₹138 if price breaches ₹134.7 decisively.

Published on March 23, 2020

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