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Aluminium prices have been beaten down badly recently. The aluminium futures contract on the Multi Commodity Exchange (MCX) has been on the decline for almost three weeks now. The contract has tumbled around 10 per cent from its high of ₹235 per kg made earlier this month. It is currently trading at ₹212 per kg.
Outlook
Strong support is seen in the ₹211-210 region. This is holding as of now. Considering the sharp and swift fall recently, the chances that the aluminium contract will sustain above ₹210 at least for some time are high. So, a strong bounce from here can trigger a corrective rise to ₹219-220 in a week or two. If the contract breaches ₹220, the upside can extend to ₹224.
However, the broader trend will still remain down. We expect the MCX Aluminum Futures contract to resume its fall either from ₹219-₹220 itself, or after an extended rise to ₹225. That will take the contract down to ₹211-₹210 again.
Trade Strategy
Considering thechances of a corrective rise from current levels, we suggest traders go long at current levels of ₹212 and accumulate at ₹210. Keep the stop-loss at ₹208. Trail the stop-loss up to ₹214 as soon as the contract moves up to ₹216. Move the stop-loss up to ₹215 when the contract touches ₹217. Exit the long positions at ₹218.
Since this is a contrarian trade, low-risk appetite traders can stay out.
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