Commodity Calls

MCX-Aluminium hovers above a crucial support

Gurumurthy K BL Research Bureau | Updated on November 26, 2018 Published on November 26, 2018

The Aluminium futures contract on the Multi Commodity Exchange (MCX) extended its downmove as expected in the past week to test the crucial support level of ₹136 per kg. The contract fell about 3 per cent from around ₹140 per kg to make a low of ₹135.8 on Friday. It has bounced from this low and is currently trading at ₹136.5 per kg.

The 100-week moving average as well as a trend line support around ₹136 is holding well as of now. Whether the contract manages to sustain above ₹136 and bounce higher or not will determine the direction of next move.

Traders can stay out of the market until a clear trend emerges.

Resistance is in the ₹138-₹140 zone which is likely to be tested if the contract sustains above ₹136 in the near term. A strong break above ₹140 is needed to ease the downside pressure. Such a break will increase the likelihood of the contract moving higher towards ₹143 and ₹145 levels over the short term.

On the other hand, if the MCX-Aluminium futures contract breaks below ₹136 decisively, the downside pressure will increase. In such a scenario, a fall initially to ₹134 is possible. A further break below ₹134 will then increase the possibility of the downmove extending to ₹132 and ₹130 thereafter.

Range-bound on LME

On the global front, the Aluminum (3-month forward) contract on the London Metal Exchange (LME) has been stuck in a sideways range between $1,925 and $1,965 per tonne over the last couple of weeks. It is currently trading at $1,949 per tonne.

A breakout on either side of $1,925 or $1,965 will decide the next move. A break below $1,925 can take the LME-Aluminum contract to $1,900. On the other hand, a break above $1,965 can initially test $1,970. A decisive break above $1,970 is needed to turn the outlook positive. Such a break can target $2,000 thereafter. But a pull-back from the $1,965-$1,970 resistance zone may drag the contract lower to $1,950 and $1,925 levels again.

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

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