Commodity Analysis

MCX-Aluminium lacks momentum

Gurumurthy K | Updated on January 14, 2019 Published on January 14, 2019

The Aluminium futures contract on the Multi Commodity Exchange of India (MCX) seems to be lacking strength. The corrective bounce from the low of ₹124.75 made on January 2 seems to have lost its momentum. The contract inched higher in the initial part of last week and made a high of ₹132.1 per kg on Wednesday. However, the contract has reversed lower thereafter and has come-off from the high. It is currently trading at ₹129 per kg.

The price action on the chart leaves the bias bearish. Technically, the 21-day moving average resistance at ₹132 has halted the corrective rally last week. This leaves the broader downtrend intact. Immediate support is at ₹128. A break below it can drag the contract lower to ₹125. A further break below ₹125 will then increase the likelihood of the contract extending its downmove to ₹123 or even ₹120.

Trading strategy

Traders with high-risk appetite can go short at current levels and also on rallies at ₹131. Stop-loss can be placed at ₹133 for the target of ₹122. Revise the stop-loss lower to ₹128 as soon as the contract moves down to ₹126.

Global trend

The resistance at $1,890 per tonne for the Aluminum (3-month forward) contract on the London Metal Exchange (LME) has limited very well. The contract made a high of $1,885 last week and has come-off from there. It is currently trading at $1,836. A dip to test the $1,800-$1,785 support zone is likely in the near term. A break below $1,785 can drag the contract lower to $1,760 and $1,740 in the short term.

On the other hand, if the LME-Aluminum contract manages to sustain above the $1,800-$1,785 support zone, a bounce-back move to $1,900 is possible. In such a scenario, a range-bound move between $1,785 and $1,920 can be seen for some time.

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

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