Commodity Calls

MCX-Aluminium hovers above a key support

Gurumurthy K BL Research Bureau | Updated on October 08, 2018 Published on October 08, 2018

Bias bullish on the chart

It was a volatile week for the Aluminium futures contract on the Multi Commodity Exchange (MCX). The contract surged breaking above the key resistance level of ₹152 per kg in the past week as expected. The news on the closure of Norsk Hydro’s alumina refinery in Brazil – world’s largest, increased the fear in the market on supply disruption. This in turn triggered a strong rally in the aluminium prices.

The MCX-Aluminium contract surged about 10 per cent intra-week and made a high of ₹167.8 per kg on Thursday last week. The contract has however, come-off sharply from the high wiping out most of the gains and is currently trading at ₹154.5 per kg.

The contract is hovering above a key ₹154-₹152 support zone. Whether the contract reverses higher from this support zone or not will decide the next move. If the contract manages to reverse higher from the ₹154-₹152 support region in the coming days, an up-move to ₹158 or ₹160 is possible. A strong break above ₹160 will then trigger a fresh rally to revisit ₹166 and ₹168 levels in the coming weeks.

On the other hand, if the MCX-Aluminium futures contract breaks below ₹152 decisively, it can fall to ₹150. A further break below ₹150 will then increase the likelihood of the contract extending its down-move to ₹147 or ₹145.

The bias is bullish on the chart. The 55-day moving average has crossed over the 200-day moving average. Similarly, the 21-day moving average has crossed the 100-day moving average. This is a bullish signal indicating that the downside could be limited in the short term. As such, the possibility remains high of the contract reversing higher from the ₹154-₹152 support zone in the coming days.

Trading strategy

Traders with a high-risk appetite can go long on dips at ₹153. Stop-loss can be placed at ₹148 for the target of ₹163. Revise the stop-loss higher to ₹156 as soon as the contract moves up to ₹159.

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

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