Commodity Calls

MCX-Aluminium tests a key support

Gurumurthy K BL Research Bureau | Updated on December 17, 2018 Published on December 17, 2018

The aluminium futures contract on the Multi Commodity Exchange of India (MCX) fell in the past week. The contract failed to sustain above ₹140 per kg and fell sharply after making a high of ₹143 per kg on December 11. The contract has tumbled 4 per cent from the high and is currently trading at ₹137.5 per kg.

A key support is near current levels at ₹137. Whether the contract sustains above this support or not will decide the direction of the next move. A bounce from ₹137 can take the contract higher to ₹140. A strong break and a decisive close above ₹140 is needed for the contract to gain momentum. Such a break can take the contract higher to ₹144 and ₹146. Inability to breach the ₹144-₹146 resistance zone can pull the contract lower to ₹141 and ₹140 again. But a further decisive break above ₹146 will then increase the likelihood of the up-move extending to ₹149 and ₹150.

On the other hand, if the MCX-Aluminium futures contract breaks below ₹137, the downside pressure would increase. The contract can initially target ₹134. A strong break below ₹134 will increase the possibility of the contract tumbling towards ₹130 and ₹128 in the coming weeks.

Traders can stay out of the market until a clear trend and a trade signal emerges.

Global trend

The aluminium (3-month forward) contract on the London Metal Exchange (LME) is retaining its sideways movement. The contract has been range-bound between $1,900 and $2,00 per tonne over the last few weeks. Within this range, the contract fell after making high of $1,960 last week. It is currently trading at $1,926 per tonne.

Immediate support is at $1,900. If the LME-Aluminum contract manages to bounce from this support, the sideways range movement will remain intact. In such a scenario, the contract can rally to $2,000 in the coming weeks. But if the contract breaks decisively below $1,900, it can fall initially to $1,885. A further break below $1,885 will then increase the possibility of the downmove extending to $1,850.

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

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