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The Aluminium futures contract on the Multi Commodity Exchange failed to break above the resistance at ₹126 a kg last week. The contract touched a high of ₹125.8 on Thursday and has reversed lower from there. It is currently trading at ₹123.5.
Technically, this downward reversal is significant as this has happened from a key channel resistance level of ₹126. The contract has been moving inside a channel since March. The pull-back from ₹126 keeps this movement intact.
As such, there is a strong likelihood of the contract falling to ₹121, ₹120 or even ₹119 — the channel support in coming weeks.
Intermediate supports are at ₹123 and ₹122. Short-term traders with a big risk appetite can go short on rallies at ₹124.5. A stop-loss can be placed at ₹127 for the target of ₹120. Revise the stop-loss lower to ₹123.5 as soon as the contract moves down to ₹122.5.
However, the contract will gain fresh momentum only if it breaks above ₹126 decisively. Such a break can take the contract higher to ₹127.5 immediately.
A further break above ₹127.5 will increase the possibility of the contract rallying to ₹130.
The contract may come under more pressure if it declines below the channel support at ₹119. Such a break can drag it to ₹117 or even ₹115 thereafter.
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