Aluminium futures on the Multi Commodity Exchange (MCX) lost 2.9 per cent last week as it closed at ₹205.75 on Friday. This was in line with our expectations. That said, further decline from the current level is less likely since ₹206 is a strong support.
The 20-day moving average currently lies at ₹205.60, denoting that the region around ₹206 is a support. The trend will turn bearish only if the contract decisively falls below ₹204. Therefore, the price band of ₹204-206 can be viewed as a support band.
We anticipate a recovery in the upcoming sessions where aluminium futures could appreciate to ₹215, a resistance. Subsequent barrier is at ₹225. On the other hand, support below ₹204 can be seen at ₹200 and ₹195.
Trade strategy
When aluminium futures was trading at around ₹210 last week, we suggested waiting for the price to decline to ₹206 before initiating fresh long positions.
Traders can now go long as the contract has seen a dip. Place stop-loss at ₹202. When the contract rallies to ₹212, tighten the stop-loss to ₹208. Book profits at ₹215.