Commodity Calls

Downtrend resumes in MCX-Aluminium

Gurumurthy K BL Research Bureau | Updated on November 19, 2018 Published on November 19, 2018

After trading in a narrow sideways range between ₹142 and ₹147 per kg for more than two weeks, the Aluminium futures contract on the Multi Commodity Exchange (MCX) broke below ₹142 last week. The contract tumbled over 3 per cent intra-week to hit a low of ₹138.15 on Thursday. It has bounced slightly from the lows and is currently trading at ₹139 per kg.

The downtrend that has been in place since October is intact. However, a crucial support is near current levels in the ₹137-₹136 region. A dip to test this support zone is likely in the near term. But whether the contract manages to reverse higher from this zone or not will determine the direction of the next move.

A bounce-back from the ₹137-₹136 will ease the downside pressure. In such a scenario, a corrective rally to ₹142 and ₹143 is likely on the back of short-covering.

But a strong break below ₹136 will bring fresh sellers into the market. It will drag the MCX-Aluminium futures contract initially lower to ₹133. A further break below ₹133 will then increase the likelihood of the downmove extending to ₹131 and ₹129 thereafter.

On the global front, the Aluminum (3-month) contract on the London Metal Exchange (LME) has declined below the psychological level of $2,000 per tonne in October. The contract is continuing to trade below $2,000 and is currently trading at $1,940 per tonne. Immediate support is at $1,930. A bounce from this support can trigger a relief rally to $2,000 in the coming week.

But a break below $2,000 can take the contract lower initially to $1,900. A further break below $1,900 will increase the possibility of the contract tumbling towards $1,8500 thereafter.

Trading strategy

Short-term traders with high risk appetite can go long if the contract reverses higher from the ₹137-₹136 support zone. Stop-loss can be placed at ₹132 for the target of ₹141. Revise the stop-loss higher to ₹138 as soon as the contract moves up to ₹139.

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

 

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