After two weeks of strong rally, aluminium prices met with a key resistance and slumped in the past week. The US signalling ease of sanctions on Russia, including the top aluminium producer Rusal, triggered a sell-off in the prices. Aluminium prices had surged after the US announced sanction on Russian companies, including Rusal.
The Aluminium futures contract on the Multi Commodity Exchange made a high of ₹169.2 per kg on April 23 and tumbled 14 per cent to make a low of ₹145.55 on Tuesday last week. The contract has been range-bound between ₹145 and ₹154 since then. It is currently trading at ₹148 per kg.
Immediate outlook is unclear. A key support is at ₹146.5 – the 21-day moving average. Resistance is at ₹154. A breakout on either side of ₹146.5 or ₹154 will determine the next move for the contract.
If the contract manages to sustain above ₹146.5 and breaks above ₹154, the downside pressure will ease. Such a break can take the contract higher to ₹161. On the other hand, if the MCX-Aluminium futures contract declines below the 21-day moving average support, a fall to ₹143 or ₹140 is possible. Cluster of supports are poised in between ₹143 and ₹140. So further fall below ₹140 looks less probable at the moment.
Trading strategy
High-risk appetite traders can go short on a break below ₹146.5. Stop-loss can be placed at ₹148 for the target of ₹143. Revise the stop-loss lower to ₹145.5 as soon as the contract moves down to ₹144.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.
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