The aluminium futures contract on the Multi Commodity Exchange (MCX) extended its downmove in the past week as expected. The contract tumbled over 3 per cent intra-week to make a low of ₹147.6 a kg. The contract has bounced slightly from this low and is currently trading at ₹148.2 per kg.

Outlook

The 61.8 per cent Fibonacci retracement support at ₹147.6 is holding well as of now. The contract has been hovering above this support over the last few days. If it manages to sustain above this support, a relief rally to ₹153 or ₹154 is possible. However, the indicators on the chart are negative. The 21-day moving average has crossed below the 55-day moving average. Also, cluster of trendline resistances are poised in between ₹153 and ₹154. This leaves the possibility less of the contract breaking above ₹154 in the short-term.

A pull-back from the ₹153-₹154 resistance region will drag the contract lower to the key support level of ₹147.6 again. A break below this support can take the contract further lower to ₹146 – a key support level. Further break below ₹146 will then increase the possibility of the contract extending its fall towards ₹143 or ₹142 thereafter.

Trading strategy

Traders can wait for a bounce and go short at ₹152 and ₹153. Stop-loss can be placed at ₹155 for the target of ₹146. Revise the stop-loss lower to ₹150 as soon as the contract moves down to ₹148.5.

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

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