Aluminium futures (May contract) on the Multi Commodity Exchange (MCX) are showing signs of a new leg of rally. After consolidating between ₹230 and ₹237over the last two weeks, the contract rallied past ₹237 last week. It closed at ₹239.75 on Friday.
With the latest uptick, which is backed by good volumes, the price action shows that aluminium futures are now aligning back to the broader uptrend. From the current level, the nearest potential resistance is at ₹255. Subsequent resistance is at ₹270.
On the other hand, if aluminium futures see a dip in price from here, ₹230 can act as a strong support. Just below this lies the 50-day moving average at ₹225. So, essentially, the price region between ₹225 and ₹230 will be a good support.
If the contract slips below ₹225, the short-term trend can turn bearish. In such a case, aluminium futures can drop to ₹210, a support. Subsequent support is at ₹200.
Trading strategy
Buy aluminium futures now at ₹240 and add longs if the price dips to ₹232. Place stop-loss at ₹226. When the contract touches ₹248, tighten the stop-loss to ₹240. Book profits at ₹255.