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Aluminium futures (August series) on the Multi Commodity Exchange (MCX) has been moving in a sideways range since the past two weeks. It has been oscillating between ₹208 and ₹215. Prior to this, the contract saw a downtrend, which began in early June at ₹250.
The prevailing consolidation means that the downtrend has lost momentum. Also, there is a strong support band between ₹206-210. While this does not mean a bullish trend reversal, the odds are now favourable for the bulls.
We expect aluminium futures to at least witness a minor rally to ₹225 from the current market price of ₹212. A breakout of ₹225 can lift the contract to ₹232. But if the contract resumes the decline and breaks below ₹206, it can quickly drop to ₹190.
But overall, as it stands, the bears have lost traction and aluminium futures is hovering near a considerable support. Therefore, the likelihood of a rally from here is high.
Trade strategy
Last week, we recommended buying aluminium futures at ₹212. Hold this trade and add longs in case the price dips to ₹208. Maintain a stop-loss at ₹204. Alter the stop-loss up to ₹212 when the price hits ₹220. Book profits at ₹225.
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