The May futures contract of aluminium on the MCX has slipped below the lower boundary of the range (₹131 to ₹136) within which it has been oscillating since mid-March. Currently trading at around ₹130.7, the contract has lost about 6.3 per cent year-to-date. Notably, the major trend of the metal is bearish.

The price remains below both the 21- and 50-day moving averages (DMAs) — a bearish indication. Corroborating this, the daily Relative Strength Index (RSI) has been declining over the past week along with the contract price. Moreover, the Moving Average Convergence Divergence (MACD) indicator on the daily chart is showing a fresh downtick and it is hovering in the negative territory.

On the back of a fresh downward momentum, the contract has been softening in the past week and is now trading below the important level of ₹131. A daily close below ₹131 can invite more bears, dragging the contract to its previous low at ₹128.3. A break below that level can drag the contract price to ₹123.6. On the other hand, if the contract recovers from current levels, the price might witness a resistance at ₹133.6 — its 21-DMA. Subsequent resistance is at ₹135.6 — its 50-DMA.

On the global front, the price of the three-month rolling forward contract of primary aluminium on the LME, which has been recovering since the beginning of the month, faced a considerable resistance at $1,520. Unable to move beyond that level, the contract has started to moderate and has slipped below $1,500. The contract will remain bearish as long as it stays below $1,520 and a drop in price can weigh on the MCX contract as well.

Trading strategy

The futures contract on the MCX is exhibiting bearish signs. Also, globally, the price of the metal is struggling to advance as indicated by the contract on the LME. Hence, traders can take a bearish view and short the contract with stop-loss at ₹136.

Note: The recommendations are based on technical analysis. There is a risk of loss in trading.