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Call for commodities: aluminum will resume its downtrend

By on May 23, 2022 0

Aluminum futures on the Multi Commodity Exchange (MCX) (₹248) bounced off key support at ₹225 last week, in line with our expectations. However, the overall trend is still bearish and a decisive breakout of ₹260 can likely change the short-term outlook to positive.

Also note that ₹252 is resistance and there is a good chance that the contract will resume the downward move anywhere within the price range of ₹252-260.

Should it start falling again as we expect, it could invalidate the support at ₹225 this time and the contract could even drop towards the crucial ₹200 level. But this is a strong support where it is highly likely that aluminum futures could establish a new medium-term uptrend where it may appreciate retesting the ₹250 levels.

Since the probability of falling from the ₹252-260 price range is high, we suggest traders consider initiating new short positions. Currently, the contract is around ₹248. Wait for it to appreciate to ₹252 and then go short at that level. The initial stop-loss can be placed at ₹268. Once the price drops below ₹225, revise the stop-loss to ₹245.

Also, tighten it to ₹230 when futures fall below ₹210. Liquidate all shorts at ₹205. Thereafter, further trades may be decided based on the contract’s reaction to the support at ₹200.

Published on

May 23, 2022