The aluminium futures contract on the Multi Commodity Exchange (MCX) witnessed a strong upward reversal in the past week. The contract made a low of ₹128.3 a kg on Thursday last week and has reversed sharply higher from there. The contract has surged over 7.5 per cent from this low and is currently trading at ₹138 per kg.

US sanction lifts prices

The strong and sudden reversal in the aluminium prices was triggered after the US announced sanctions on Russian individuals, officials and companies on Friday last week. The sanction list included Rusal, one of the world’s top aluminium producers. Fear of supply constraints after the sanction had triggered a strong upward reversal in the aluminium prices.

Outlook

The MCX-Aluminium futures contract is currently hovering around a key resistance level of ₹136 – the 50 per cent Fibonacci retracement level. If the contract manages to sustain higher, the current upmove can extend towards ₹138 in the coming days. Inability to break above ₹138 can trigger a pull-back move towards ₹135 or ₹134. But if the MCX-Aluminium futures contract manages to surpass the next resistance at ₹138, it can target ₹141 or even higher levels thereafter.

Key support for the contract is in the ₹134-₹133 region. The contract will come under pressure again only if it declines below ₹133 decisively. In such a scenario, there is a strong likelihood of the contract falling towards ₹128 or ₹127 thereafter.

Trading strategy

Traders can wait for dips and go long if the contract reverses higher from the ₹134-₹133 support region. Stop-loss can be placed at ₹131 for the target of ₹138. Revise the stop-loss higher to ₹135 as soon as the contract moves up to ₹136.5

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

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