Aluminium futures on the Multi Commodity Exchange (MCX) experienced a period of decline from February to June. But then it shifted into a sideways trading pattern as the downward momentum waned. Since early July, the continuous contract has been fluctuating within the range of Rs. 196-204.
The contract is currently trading at Rs. 202 i.e., near the range top. Last Friday, the contract witnessed a sharp fall in price after marking an intraday high of Rs. 204.8, showing that the resistance at Rs. 204 is strong.
Therefore, the probability of a fall from the current level is high. We expect the contract to decline back to the range bottom of Rs. 196.
If the support at Rs. 196 is breached, it can establish the next leg of downtrend which can drag the contract to Rs. 186 or even to Rs. 180. On the other hand, if the contract breaks out of Rs. 204, it can appreciate to Rs. 215.
Trade strategy
Last week, we recommended initiating short positions at an average price of Rs. 203 with a stop-loss at Rs. 206. Retain this trade. When the contract touches Rs. 198, tighten the stop-loss to Rs. 201. Book profits at Rs. 196.