Aluminium futures on the Multi Commodity Exchange (MCX) bounced off a support at ₹194 in early July. But it was unable to rally above resistance at ₹202. Also, the 50-day moving average lies at around ₹204, thereby making the price band of ₹202-204 a resistance.
The contract has fallen off this level and is now trading around ₹200. The overall trend remains bearish, raising the probability of a decline. While the nearest support is at ₹194, there is a good chance the contract will drop to ₹190.
On the other hand, if the contract moves above ₹204, the short-term trend can turn bullish. In that case, an upswing to ₹215, a notable resistance, is possible. Subsequent barrier is at ₹226.
Trade strategy
One can sell aluminium futures at the current level of ₹200. Add more longs when the price rallies to ₹202. Place stop-loss at ₹205.
When the contract touches ₹194, tighten the stop-loss to ₹198. Book profits at ₹191.