The aluminium futures (continuous contract — ₹210) on the Multi Commodity Exchange (MCX) was trading in a sideways range — oscillating within the price band of ₹200-215 — since mid-June. The contract broke out of this range on August 11 and closed at ₹218.15, giving it a bullish inclination. However, this turned out to be a false signal as the contract fell back into the ₹200-215 range and currently trades at around ₹210.
Notably, the 20- and 50-day moving averages lie at ₹210. Also, a rising trendline coincides at this level and this means the bulls might still have a chance to turn the tide. But that is uncertain.
If the contract rallies and moves above ₹215, it can touch ₹230 in the near term. A breach of this level can lift it to ₹240. On the other hand, if aluminium futures declines and invalidates the support at ₹200, it can turn the near-term outlook bearish. The nearest supports below ₹200 are at ₹193 and ₹186.
Strategy: Following the breakout and a supposed pullback last week, we had recommended fresh long positions at around ₹212 with stop-loss at ₹204 for a target of ₹230. Traders who executed this move can exit the position at the current level of ₹210 as the trend has now become unclear because of a false breakout.
Wait for MCX aluminium futures to move out of the ₹200-215 range before initiating fresh positions.
August 23, 2022