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Aluminium futures (October) on the Multi Commodity Exchange (MCX) broke out of the resistance at ₹236 two weeks back and hit a high of ₹244.65 on October 3.
The contract could not extend the rally, and it moderated. The October contract closed at ₹232.65 on Wednesday.
The chart indicates that aluminium futures might drop further. Nevertheless, the downside is expected to be arrested by the support at ₹228.
After softening in the ₹228-230 price band, we expect the contract to resume its rally. The upswing can take aluminium futures to ₹255.
On the other hand, if the support at ₹228 is breached, the near-term outlook can turn bearish. In such a case, the price can decline to ₹218.
That said, as it stands, aluminium futures continue to exhibit a positive bias and the probability of a recovery from the ₹228-230 support band is high.
Trade strategy
Last week, we suggested buying aluminium October futures at an average price of ₹236. Retain this trade with a stop-loss at ₹228.
Traders looking for fresh opportunities can also consider going long at ₹233, with a stop-loss at ₹228.
Going ahead, when the contract touches ₹245, trail the stop-loss to ₹238. Tighten the stop-loss further to ₹245 when the price touches ₹250. Book profits at ₹255.
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