Aluminium futures on the Multi Commodity Exchange (MCX), since May, has been trendless and charting a horizontal price movement. Largely, the contract has been oscillating within ₹204 and ₹210. It briefly traded below ₹204 early this week but has now moved up to the current level of ₹205.
Notably, below ₹204, there is another strong support at ₹200. So, effectively, traders can consider ₹200-210 as the range and thus, the trend will turn bearish only if the contract’s price falls below ₹200.
As the aluminium futures are trading near the range-bottom, the probability is high for it to see a bounce to ₹210. If the upswing extends, resulting in a breach of ₹210, the short-term trend could turn bullish. In such a case, we can expect the contract to rise to ₹218.
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On the other hand, if the price falls below ₹200, the near-term outlook will become negative. While the nearest support is at ₹194, a break below ₹200 can drag the contract to the major support at ₹186.
Trade strategy
When the contract was trading at around ₹204 last week, we had recommended to initiate fresh longs. Traders, who bought aluminium futures, can retain the trade.
Maintain the stop-loss at ₹200 and book profits if aluminium futures rally to ₹210.
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In case the above buy trade’s stop-loss is hit and the support at ₹200 is decisively breached, traders can sell aluminium futures with stop-loss at ₹205. Exit this short position on a fall to ₹186.