Technical Analysis

MCX-Aluminium reverses higher from a key base

Yoganand D BL Research Bureau | Updated on December 03, 2018 Published on December 03, 2018

The aluminium futures contract on the Multi Commodity Exchange of India continued to trend downwards in the previous week as well.

After testing a key support at ₹135 the contract reversed the trend on Monday by gaining 2.3 per cent to trade at around ₹140.4 per kg. This upward reversal is triggered by a positive divergence in the daily relative strength index. The indicator has started to recover from the oversold territory and is on the brink of entering the neutral region from the bearish zone.

In early October, the contract encountered a significant resistance at ₹165 and started to decline. Since then, the contract has been on a medium-term downtrend. While trending down, the contract breached key supports at ₹150 and ₹145 in late October and November. However, the contract found support at around ₹135 recently and began to move upwards.

The contract now tests a key immediate resistance at ₹140. A decisive break above this barrier will strengthen the upmove and take the contract higher to ₹145 in the short term. A further rally above ₹145 will reinforce the bullish momentum and accelerate the contract northwards to ₹150 in the short to medium term.

Traders with a short-term view can take long positions on a strong close above ₹140 with a fixed stop-loss at ₹135. The short-term targets are ₹145 and ₹150 levels. Conversely, if the MCX-Aluminium futures contract plunges below the significant support level of ₹135, bearish momentum can drag the contract down to ₹132 and ₹130 in the short term. In that case, traders should avoid taking long positions.

Global trend

On the global front, the Aluminum (three-month forward) contract continues to be range-bound between $1,925 and $1,965 per tonne on the LME. It is currently trading at $1,957 per tonne with a positive bias.

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