Commodity Calls

Near-term outlook is unclear for MCX-Aluminium

Gurumurthy K Updated on December 10, 2018

The Aluminium futures contract on the Multi Commodity Exchange (MCX) has been oscillating around ₹140 per kg over the last week. The contract has been stuck in a narrow range between ₹137 and ₹141. It is currently trading at ₹139.5 per kg.

The near-term outlook is mixed. A breakout on either side of ₹137 or ₹141 will determine the direction of the next move. Traders can stay out of the market until a clear trend and a trade signal emerges.

A strong break above ₹141 will ease the downside pressure. Such a break will trigger a fresh rally to ₹144 and ₹145 on the back of short covering. The region between ₹145 and ₹146 is the next key resistance. Inability to breach this resistance zone can pull the contract lower to ₹141 and ₹140 again. But a strong break above ₹146 will boost the momentum. Such a break will then take the contract initially higher to ₹149. A further break above ₹149 will then increase the likelihood of the contract extending its upmove to ₹152 over the medium term.

On the other hand, if the MCX-Aluminium futures contract breaks the current range below ₹137, it can come under renewed pressure. In such a scenario, the contract can fall initially to ₹133 or ₹132. A further break below ₹132 will increase the downside pressure. Such a break will then drag the contract lower to ₹129 and ₹127 thereafter.

Global trend

On the global front, the Aluminum (3-month forward) contract on the London Metal Exchange (LME) has also been in a sideways range over the last few weeks. The contract has been stuck between $1,900 and $2,000. Within this range, the contract made a high of $1,996 per tonne in the past week and has come-off from there. It is currently trading at $1,955 per tonne.

The LME-Aluminum contract is likely to retain this sideways move for some more time. A breakout on either side of $1,900 or $2,000 will give a clear cue on the direction of the next move.

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

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