The aluminium futures (continuous contract) on the MCX (Multi Commodity Exchange) hit a high of ₹325.4 in March. However, ever since that occurred, the contract has been on a decline. By closing at ₹210.45 on Monday, it lost about 35 per cent from the peak of ₹325.4 indicating bearish sentiment.
For the past one month, the contract has been charting sideways, largely trading between ₹200 and ₹215. The next leg of the short-term trend depends on which direction the contract traverses upon.
On breaching the support at ₹200, it has l nearest support at ₹187 and the subsequent one is at ₹160. But, in case, if aluminium futures breaks out of ₹215, it can turn the near-term trend bullish, wherein the contract can rally to ₹235. If this resistance is invalidated, it can move towards the resistance band of ₹250-254. The 38.2 per cent Fibonacci retracement of the recent downtrend coincides at ₹250, making it a significant hurdle for the bulls to cross.
A rally beyond the above-mentioned resistance band is less likely. The contract is expected to begin the next leg of downtrend either at ₹235 or in the ₹250-254 price region.
Traders can stay on the fence now and consider fresh short positions if the support at ₹200 is breached or if the contract witnesses a corrective rally to ₹235 or ₹250.