Commodity Calls

MCX-Aluminium can dip before reversing higher

Gurumurthy K BL Research Bureau | Updated on March 18, 2019 Published on March 18, 2019

The Aluminium futures contract on the Multi Commodity Exchange (MCX) seems to be lacking strength. The contract made a high of ₹148.5 per kg on Wednesday and has come-off sharply from there. The contract has declined over 3 per cent from the high and is currently trading at ₹144 per kg.

Immediate resistance is at ₹146. As long as the contract trades below this resistance, a dip to ₹144 or ₹143 is possible in the coming sessions. A further break below ₹143 will then increase the possibility of the fall extending to ₹140 and ₹139. The region between ₹140 and ₹139 is a strong support and a break below it looks less likely. An upward reversal from this support zone will have the potential to take the contract higher to ₹150 levels again.

The region between ₹152 and ₹153 is a crucial resistance. A strong break and a decisive close above ₹153 will pave way for the next targets of ₹155 and ₹158.

Trading strategy

Trades with a medium-term perspective can make use of dips to go long at ₹143 and ₹141. Stop-loss can be placed at ₹138 for the target of ₹152. Revise the stop-loss higher to ₹145 as soon as the contract moves up to ₹147.

Global trend

The Aluminium (3-month forward) contract on the London Metal Exchange (LME) has been range bound between $1,845 and $1,935 per tonne since mid-January. The contract has risen in the past week after testing $1,845 – the lower end of the range. It is currently trading at $1,897 per tonne.

A breakout on either side of $1,845 or $1,930 will determine the direction of the next move. A strong break above $1,930 will take the LME-Aluminium contract higher to $2,000. On the other hand, a fall to $1,800 is possible if the contract declines below $1,845.

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

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