Commodity Calls

Corrective rally likely in MCX-Aluminium

Gurumurthy K Updated 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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