MCX aluminium reverses from a key hurdle

<p>The aluminium futures contract traded on the Multi Commodity Exchange (MCX) plunged 3.6 per cent to close at INR 107.4 a kg last week.<br /><br />Significant resistance at around INR 111 which is also 50 per cent Fibonacci retracement level of the prior downtrend has been limiting the contract&rsquo;s rally since late February.<br /><br />After testing this resistance for more than two week, the contract changed direction and started to decline in the previous week. This reversal in the contract is triggered by the negative divergence in the daily indicators such as price rate of change and moving average convergence divergence.<br /><br />The contract is in a near-term downtrend and currently tests a key support at INR 107 with a negative bias.<br /><br />On Wednesday, the contract was marginally down; trading at INR 106.5. The daily relative strength index has entered the bearish zone from the neutral region, backing the downtrend. Also, the daily price rate of change indicator is hovering in the negative territory implying selling interest.<br /><br />Traders with a short-term perspective can make use of rallies to initiate fresh short positions while maintaining a stop-loss at INR 109.<br /><br />Strong downward breakthrough of the immediate support level of INR 107 will strengthen the downtrend and pull the contract down to INR 103 and INR 100 in the short-term. A conclusive tumble below the significant support at INR 103 will mitigate the medium uptrend and pull the contract down to INR 100 or even to INR 98.<br /><br />Conversely, the contract has a key resistance in the band between INR 110 and INR 111.<br /><br />Only a conclusive break out of this band will reinforce the bullish momentum and accelerate the contract northwards to INR 116 and then to INR 120 in the medium-term.</p>