The Aluminium futures contract on the Multi Commodity Exchange of India (MCX) fell for the second consecutive week. The contract has tumbled about 4 per cent in the past week. It is currently trading at ₹133.5 per kg.
Downtrend intact
The outlook is negative. The strong fall over the last two weeks indicates that the downtrend that has been in place since October remains intact. A key resistance is at ₹137 which is likely to cap the upside in the short term. Intermediate bounce to this hurdle is likely to attract fresh sellers coming into the market. A fall to ₹130 or even ₹128 is possible in the coming days. The region between ₹128 and ₹127 is a crucial long-term support level. Whether the contract manages to bounce from this support or not will be key in deciding the next move.
An upward reversal from the ₹128-₹127 support zone can take the contract higher to ₹135 and ₹137. It may also signify that the downtrend ends. On the other hand, if the MCX-Aluminium futures contract breaks decisively below ₹127, the downside pressure will increase. Such a break can drag the contract lower to ₹123.
Trading strategy
Traders can make use of bounce to go short at ₹135 and ₹137. Stop-loss can be placed at ₹139 for the target of ₹128. Revise the stop-loss lower to ₹133 as soon as the contract moves down to ₹131.
Note: The recommendations are based on technical analysis. There is a risk of loss in trading.