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Since taking support at ₹93 per kg in October 2015, the aluminium futures contract on the Multi Commodity Exchange (MCX) has been in a long-term uptrend. Also, the medium-term trend is up for the contract.
Following a short-term corrective decline, the contract found support at around ₹129 during second week of this month. Triggered by positive divergence in the daily relative strength index, the contract reversed direction for the key long-term support level of ₹129.
The 200-day moving average poised at around ₹129 also cushioned the contract. Since then, the contract has been in a short-term uptrend. Last week, the contract had gained 6 per cent accompanied with good volume.
While trending up during last week, the contract emphatically breached a key resistance at ₹136 as well as the 50-day moving average. The contract trades well above its 21- and 50-day moving averages.
The daily relative strength index of the contract feature in the bullish zone and the weekly RSI is on the brink of entering this zone from the neutral region. Both the daily and weekly price rate of change indicators hover in the positive terrain implying buying interest.
On Monday, the contract advanced almost 2 per cent to trade at 139.4 per kg and tests a vital medium-term resistance at ₹140.
The short-term outlook is bullish for the contract and an upward breach of the key resistance at ₹140 is possible in the near term.
In that case, the contract can extend its short-term uptrend and reach the price targets of ₹145 and ₹150 in the short to medium term.
However, inability to move beyond ₹140 can pull the contract down to ₹137 or ₹136 where the key immediate support can provide base. Next supports below ₹136 are placed at ₹134 and ₹132. Long-term support to watch is at ₹129 for the contract.
Traders with a short-term perspective should tread with caution and consider taking long positions on a decisively rally beyond ₹140 with a fixed stop-loss.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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