Aluminium futures on the Multi Commodity Exchange (MCX), which was on a downtrend between February and June, have lost momentum and are moving sideways. The continuous contract has been oscillating in the ₹196-204 range since early July.

In a little over the past one week, aluminium futures have rallied on the back of support at ₹196. The September contract, which marked an intra-week high of ₹204.5 last week, has now moderated to ₹200.

As it stands, the contract does not appear to possess enough momentum to surpass the hurdle at ₹204. So, the likelihood of the price retracing to the range bottom of ₹196 looks high.

If this level is breached, it can establish the next leg of downtrend, which can drag the contract to ₹186 or even ₹180. On the other hand, if the contract breaks out of ₹204, it can appreciate to ₹215.

Trade strategy

Since the range of ₹196-204 is expected to stay true in the short run and aluminium futures are hovering near the range top, traders can consider fresh short positions.

Short the contract at ₹200 and add shorts in case the price inches up to ₹204. Place a stop-loss at ₹206. When the contract touches ₹198, tighten the stop-loss to ₹201. Book profits at ₹196.

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