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Aluminium futures contract on the Multi Commodity Exchange has reversed sharply lower after making a high of ₹135.6 per kg in the past week. The contract has fallen over 2 per cent from this high and is currently trading at ₹132.7 per kg. The sharp fall last week has taken the contract well below the key 21-day moving average support level of ₹133.5. This level will now act as a key near-term resistance and cap the upside.
The short-term outlook has turned bearish. There is a strong likelihood of a corrective fall to ₹131 or ₹130 in the coming days. If the contract manages to reverse higher from ₹131 or ₹130, a bounce back move to ₹133 or ₹135 is possible. But further fall below ₹130 will increase the possibility of the downmove extending to ₹127.
Short-term traders with high risk appetite can go short. Stop-loss can be placed at ₹134 for the target of ₹130. Revise the stop-loss lower to ₹132 as soon as the contract moves down to ₹131.5.
The downside pressure will ease only if the MCX-Aluminium futures breaks above the 21-day moving average decisively. Such a break can then take contract higher to ₹135 and ₹137 levels again. But such an upmove looks less probable in the near-term.
The recommendations are based on technical analysis. There is a risk of loss in trading
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