Aluminium futures on the Multi Commodity Exchange (MCX) fell below the support at ₹204 nearly two weeks ago. This has turned the trend bearish. The continuous contract is now trading around ₹195.
From the current levels, the nearest support band is between ₹182 and ₹186. As it stands, the probability of the contract falling towards these levels is high.
However, we might see a corrective rally from the current levels, probably to ₹200. Post this move, aluminium futures could resume the decline.
To tide over the negative trend, the contract has to surpass the resistance at ₹205. In such a case, aluminium futures could rally up to ₹210.
However, as mentioned above, at this juncture, the likelihood of a fall is high.
Trade strategy
Traders can go short on aluminium futures at the current level of ₹195. Add more shorts if the price rises to ₹200. Place stop-loss at ₹205.
When the contract falls below ₹190, tighten the stop-loss to ₹198. When the contract touches ₹186, move the stop-loss further down to ₹192. Liquidate the shorts at ₹182.