Technical Analysis

Outlook positive for MCX-Aluminium

Akhil Nallamuthu BL Research Bureau | Updated on December 23, 2019 Published on December 23, 2019

Though the spot price of Aluminium on the MCX is trading between ₹128.5 and ₹136, the recent higher low on the daily chart provides some hope for the bulls. Also, the 21-DMA has crossed over the 50-DMA, turning the short-term outlook positive.

Likewise, the December futures contract of the metal on the MCX has formed a higher low and is currently hovering at ₹134, near the upper boundary of the range between ₹130 and ₹135. The moving average convergence divergence indicator on the daily chart is showing a positive momentum being built.

The daily Relative Strength Index (RSI) too gives a positive bias as it has crossed above the midpoint level of 50 and continues its upward trajectory. However, as the contract has a considerable resistance at ₹135, only a breakout of that level can be taken as a bullish confirmation.

A close above ₹135 on a daily basis would attract more buyers and the contract can be expected to 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. On the other hand, if the contract drops, the lower boundary of the range at ₹130 can act as a base. Support below that level is at ₹125.

The three-month rolling forward contract of Aluminium on the London Metal Exchange (LME) broke out of the range between $1,745 and $1,790, opening the door for further appreciation. Hovering around an important level of $1,800, the immediate resistance is at $1,830. The support below $1,790 is at $1,745.

Trading strategy

We can observe bullish price action in MCX futures and a positive breakout in LME forward. However, the December futures contract on the MCX has a crucial resistance at ₹135. Hence, traders are advised to initiate fresh buys above ₹135 with a stop-loss at ₹129.


Published on December 23, 2019

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