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The Aluminium futures contract on the Multi Commodity Exchange has reversed higher in the past week. The 200-day moving average, at ₹121 a kg, has provided support and the contract has reversed higher after recording a low of₹120.90 on Wednesday.
It is currently trading at ₹124.1. Though a rise to test the ₹125.5-₹126 resistance region cannot be ruled out, only a decisive break above ₹126 will turn the outlook positive.
Inability to break above₹126 may pull the contract lower to ₹121 once again. Such a reversal will keep the channel movement that has been in place since March intact. A subsequent fall below ₹121 can drag the contract lower to ₹120 or ₹119 thereafter.
Traders who have initiated short positions on rallies at ₹124.5 can hold on. Retain the stop-loss 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.
The bearish view mentioned above will get negated if the MCX-Aluminium futures contract breaches decisively above₹126. Such a break can take the contract higher to ₹127.5 initially. A further break above ₹127.5 can boost the momentum and will increase the likelihood of the contract targeting ₹130.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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