Contrary to expectations, the aluminum futures contract on the Multi Commodity Exchange (MCX) fell in the last week, breaking below the key support level of ₹147 per kg to a low of ₹145.3 on Thursday. The contract has managed to recover slightly since then and currently trades at ₹147 per kg.
The immediate outlook is mixed. A near-term support is at ₹145 and resistance is at ₹149. A breakout on either side of ₹145 and ₹149 will decide the next direction of move. A break below ₹145 can take it to ₹144 initially. Further break below ₹144 will then increase the likelihood of the contract falling to ₹140 or even lower.
On the other hand, if the contract sustains above ₹145 and breaks above ₹149, it can move up to test the ₹151-₹152 resistance region. A strong break and a decisive close above ₹152 will boost the momentum. Such a break will trigger a fresh rally to ₹158 or even ₹160.
Trading strategy
Traders with a big risk appetite and a medium-term perspective can go long on a break above ₹149. Stop-loss can be placed at ₹144 for the target of ₹158. Revise the stop-loss higher to ₹151 as soon as the contract moves up to ₹153.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.