The Aluminium futures contract on the Multi Commodity Exchange (MCX) inched higher in the initial part of last week. However, the positive sentiment was short-lived. The contract made a high of ₹144.55 per kg and has reversed lower from there. It is currently trading at ₹141 per kg.

A key support for the contract is at ₹138 and resistance is at ₹147 - the 21-week moving average. The contract can remain range bound between ₹138 and ₹147. A breakout on either side of ₹138 or ₹147 will decide the next trend.

The downside pressure will ease if the contract manages to breach ₹147 decisively. Such a break can take the contract higher to ₹151 initially. Further break above ₹151 will then increase the likelihood of the contract extending its rally to ₹155 or even higher levels.

But, the price action on the chart leaves the possibility less of the contract breaking above ₹147 in the coming days. The 21-day moving average at ₹142 has been capping the upside in the contract over the last few weeks. As long as the contract trades below this hurdle, there is a strong likelihood of it declining below ₹138 in the coming days.

A break below ₹138 will bring renewed pressure on the contract. Such a break can drag the MCX-Aluminium futures contract lower to ₹132 or ₹130 in the short term.

Trading strategy

Traders who have taken short positions last week at ₹144 can hold it and can also accumulate at ₹46. Retain the stop-loss at ₹149 for the target of ₹134. Revise the stop-loss lower to ₹140 as soon as the contract moves down to ₹138.

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

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