Pressure is mounting on the Aluminium futures contract traded on the Multi Commodity Exchange (MCX). The contract fell sharply in the past week breaking below the key 200-day moving average support level of ₹142.5 per kg.

The contract moved higher and made a high of ₹146 in the initial part of last week. However, it failed to sustain higher and tumbled over 5 per cent from the high to make a low of ₹138.4 on Friday. The contract has bounced slightly from the lows and is currently trading at ₹139 per kg.

Outlook

A crucial long-term support is poised near current levels in the ₹139-₹138 region. Whether the contract manages to sustain above this support zone or not will decide the next move.

If the contract sustains above ₹138 and manages to break above ₹143, an upmove to ₹146 is possible. But as long as the contract remains below ₹143, the possibility is high of it declining below ₹138 in the coming days. Such a break below ₹138, will then increase the likelihood of the contract tumbling to ₹132 or even ₹130 in the coming days.

The indicators on the chart suggest bearish signals. The 21-day moving average has crossed below the 100-day moving average. This is a negative signal indicating that the upside could be limited. As such the upside is expected to be capped in the short term. Intermediate bounce to ₹143 or ₹145 is likely to find fresh sellers coming into the market.

Trading strategy

High risk appetite traders can go short on rallies at ₹142 and ₹144. Stop-loss can be placed at ₹147 for the target of ₹132. 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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