Aluminium futures contact on MCX recovers in the last two weeks

The aluminium futures contract traded on the Multi Commodity Exchange (MCX) has recovered smartly in the last two weeks. The corrective fall from the August high of INR129 per kg found a bottom at INR116 in early October. The rally from this low signals the beginning of a new leg of the up-move for the contract. This gives short-term traders a good opportunity to initiate fresh long positions in the contract.

Short-term view
The short-term outlook is bullish for the MCX-aluminium futures contract. The contract has consolidated and formed a strong base between INR116 and INR120 between end September and mid-October. This adds strength to the recent rally that has been in place from the low of INR116.3. Key short-term supports for the contract are at INR120 and INR118. Immediate resistance is at INR123.5. There is a strong possibility of the contract breaching this hurdle and rising to INR125 and INR128 in the coming days.

Traders with a short-term perspective can go long with a stop-loss at INR119 for the target of INR127. The pattern of the 21- and 100-day moving average on the charts suggests that a fall below INR120 is less likely. So any intermediate declines to INR120 if seen can be used to accumulate long positions.

The outlook will turn negative only if the contract records a strong close below INR120. Such a break can drag it lower to INR116 once again.

Medium-term view
The medium-term trend is also up for the MCX-aluminium futures contract. But, important resistance is coming up at INR129. A rise to test this level is likely in the coming weeks. However, the contract has to breach this hurdle in order to extend its uptrend. Inability to break this resistance and a reversal from here will keep the contract under pressure for a fall to INR116 or even lower.

On the other hand, a strong break above INR129 will keep the medium-term uptrend intact. It will result in the recent rally extending to the next target of INR135.

(Note: Price as of 6 pm on Tuesday. The recommendations are based on technical analysis. There is a risk of loss in trading.)