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The February mini futures contract of Aluminium, ie, Alumini on the Multi Commodity Exchange of India (MCX) seems to have resumed its downtrend as it closed in the red for the second consecutive week.
The price level of ₹142 is acting as a substantial resistance which had capped the rally the began from ₹134. Notably, there was a spike in price that took the contract to ₹145.5, but it could not sustain, and was sold off immediately.
The contract then declined gradually, and it has slipped below the 21-day moving average, possibly shifting the short-term trend to bearish one. Currently trading at ₹138.8, the contract has its immediate support at ₹137.7 — its 50-day moving average. Also, the 61.8 per cent Fibonacci retracement level of the prior uptrend is at ₹138. Thus, the price area between ₹137 and ₹138 can act as a support band.
The relative strength index (RSI) and the moving average convergence divergence (MACD) indicator on the daily chart hints are further downside. While the RSI has been steadily declining and has gone below the mid-point level of 50, the MACD shows considerable downward momentum.
On the back of prevailing bearish momentum, if the contract breaches the support band between ₹137 and ₹138, it can attract more selling pressure, potentially dragging the price to the previous low at ₹133.4.
But if the price appreciates, ₹140.6 can act as a hurdle, above which the resistance is at ₹142.
On the global front, the price of three-month rolling forward contract of Aluminium on the London Metal Exchange (LME) fell drastically. Currently trading at $1,722, it has a critical support at $1,710.
Subsequent support is at ₹1,655. The nearest resistance is at $1,750.
Trading strategy
Though there are indications of a potential decline from current levels, one need to be cautious of the support band between ₹137 and ₹138. So, from trading perspective, initiate short positions in MCX-Alumini only if the contract decisively breaks below that price area. Place stop-loss at ₹141.
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