Commodity Calls

Corrective rally likely in MCX-Aluminium

Gurumurthy K BL Research Bureau | Updated on January 07, 2019 Published on January 07, 2019

The aluminium futures contract on the Multi Commodity Exchange (MCX) fell in the past week breaking below the crucial support level of ₹127 per kg. However, the fall was short lived. The contract made a low of ₹124.75 on Wednesday and has reversed sharply higher. It has surged about 5 per cent and is currently trading at ₹130.8 per kg.

Support is in the ₹128-₹127 region. As long as the contract trades above this support zone, a corrective rally to ₹134 is possible in the near term. A strong break above ₹134 will then increase the likelihood of the upmove extending towards ₹137 and ₹138. The region between ₹137 and ₹138 is a crucial short-term resistance. The contract has to breach this hurdle decisively to turn the outlook completely positive.

On the other hand, if the MCX-Aluminium futures contract reverses lower from ₹134 in the coming days, it can fall back to ₹130 and ₹129. A revisit of ₹127 is likely in such a scenario. It will also keep the possibility of the contract breaking below ₹127. A strong break and a decisive close below ₹127 will increase the downside pressure. Such a break will drag the MCX-Aluminum futures contract to ₹122 over the medium term.

Global trend

The Aluminum (three-month forward) contract fell as expected to test $1,800 per tonne last week. However, the contract has recovered sharply after making a low of $1,785. It is currently trading at $1,865 per tonne. A near-term resistance is at $1,890 which is likely to be tested in the coming days. If the LME-Aluminum contract manages to breach this hurdle, the upmove can extend towards $1,935 thereafter. But a pull-back from $1,890 can take the contract lower to $1,800 and $1,785 levels again.

A further break below $1,785 will then increase the likelihood of the contract extending its downmove towards $1,765 and $1,750.

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

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