LME aluminium targets $1,639-$1,657 range in three months

LME aluminium may drop into a range of $1,639-$1,657 per tonne in three months, driven by a downward wave (c).

This is the third wave of a bigger wave C that developed from the March 2, 2012 high of $2,361.50.

A Fibonacci projection analysis reveals that the wave (c) has travelled below a support at $1,781, its 76.4 percent level, and is heading towards the next support at $1,657.

In the meantime, a Fibonacci retracement analysis shows that the metal has fallen far below a support at $1,861, the 61.8 percent retracement on the rise from the Feb. 24, 2009 low of $1,279 to the May 3, 2011 high of $2,803.

Chances are it may slide to the 76.4 percent level at $1,639. This is especially possible after aluminium broke the support at $1,781, as there might not be any other support until it reaches the target zone of $1,639-$1,657.

Aluminium's drop may look suspicious in reference to the bullish outlook on copper, as these two contracts most of the time showed strong correlation in their moves historically.

However, since the ratio between them has been steady on a long-term uptrend, which may extend to 4.25 in three months, the future departure of their moves looks more acceptable. A break above $1,861 may trigger a further gain to $1,983, the 38.2 percent projection level.

No information in this analysis should be considered as being business, financial or legal advice.

Each reader should consult his or her own professional or other advisers for business, financial or legal advice regarding the products mentioned in the analyses.