Aluminium futures (September series) on the Multi Commodity Exchange (MCX) found support at ₹217 early last week and rebounded. On Monday, it closed at ₹231.8.
The contract faces resistance at ₹234. If this level is breached, aluminium futures can establish a fresh leg of uptrend, which can lift the contract to ₹242, its nearest potential barrier. Subsequent resistance is at ₹250.
But if aluminium futures fall off the hurdle at ₹234, it can drop back to ₹217. A break below the support at ₹217 can lead to the contract moderating further to ₹210.
Trade strategy
Short aluminium futures on the back of the resistance at ₹234. Place initial stop-loss at ₹238. When the contract drops to ₹225, revise the stop-loss to ₹230. Exit at ₹220.
In case the contract rises and hits the above-mentioned stop-loss, it would denote that the resistance at ₹234 has been breached. This means, aluminium futures can see a fresh leg of rally.
So, if the stop-loss of the short trade is hit, traders can consider going long with a stop-loss at ₹232. When the contract rises to ₹245, alter the stop-loss to ₹240. Book profits at ₹250.