Support limits the downside in MCX-Aluminium

Aluminium futures contract on the Multi Commodity Exchange (MCX) is retaining its strength. The contract skyrocketed 12 per cent to record a high of ₹155.75 per kg on Friday.

This sharp rally was triggered after the US announced sanctions on Russian individuals, officials and companies, including Rusal – a top aluminium producer.

Though the contract had come-off from this high, the downside was limited as it found good support around ₹150. The contract made a low of ₹149.25 and has reversed higher again. It is currently trading at ₹153 per kg.

Near-term view positive

Inability to decline below ₹150 in the past week and a subsequent bounce-back move indicates the lack of sellers in the market. As long as the contract sustains above ₹150, the outlook will remain positive.

A strong break above the immediate resistance at ₹154 can take the contract higher to ₹155 or ₹156 again. Further break above ₹156 will then increase the likelihood of the rally extending towards ₹160 or even higher levels.

The outlook will turn negative only if the contract breaks below ₹150 decisively. Such a break can drag the contract lower to ₹145 or ₹143 in the short-term.

Trading strategy

Though the contract remains above ₹150, the possibility of a corrective fall cannot be ruled out still. Traders with high risk appetite and a contrarian view can go short on a break below ₹150. Stop-loss can be placed at ₹153 for the target of ₹146. Revise the stop-loss lower to ₹148 as soon as the contract moves down to ₹146.5.

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

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