The aluminium futures contract on the Multi Commodity Exchange (MCX) has reversed higher in the past week. The crucial support level of ₹144 per kg continued to limit the downside well. After falling to ₹143.95, the contract surged over 4 per cent to hit a high of ₹149.75 on Friday. It has come-off slightly from this high and is currently trading at ₹148.50 per kg.
Bias positive
The price action on the chart suggests that the contract has been getting strong support at around ₹144 for more than two weeks. It also indicates that the contract lacks fresh selling interest to drag it decisively below ₹144. This leaves the bias positive and increases the likelihood of the contract breaching above the immediate resistance level of ₹152 in the coming days. Such a break can take the contract higher to ₹157 and ₹158 initially. Inability to break above ₹158 can trigger an intermediate pull-back move to ₹155 or ₹155. However, an eventual break above ₹158 will then increase the possibility of the upmove extending to ₹163 over the medium term.
On the other hand, if the MCX-Aluminium futures reverses lower from ₹152 in the coming days, it can dip to ₹147 and ₹144 levels again. However, the outlook will turn negative only if the contract breaks below ₹144 decisively. Such a break can take the contract lower to ₹142 or ₹140 thereafter.
Trading strategy
Traders with a medium-term perspective can go long at current levels and also accumulate on dips at ₹146.5 and ₹145. Stop-loss can be placed at ₹141 for the target of ₹162. Revise the stop-loss higher to ₹151 as soon as the contract moves up to ₹153
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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