Aluminium futures: Break down looks imminent

The aluminium prices were range-bound for nearly two weeks, after a significant fall. The continuous Aluminium futures on the MCX (Multi Commodity Exchange), which has been declining since March, oscillated between ₹205 and ₹215 for a couple of weeks.

Currently, the contract is trading at around ₹205 and the price action on the lower time charts shows that it has been forming lower highs over the past two weeks and given a bearish trend, a breach of the lower boundary of the range i.e., ₹205 is imminent. Even if there is a rally from here, it is not likely to extend beyond ₹215.

Traders can short MCX aluminium futures in two legs. That is, initiate shorts worth 75 per cent of the total intended quantity at the current level of ₹205 and add shorts for the remaining if the price rallies to ₹215. Alternatively, if the contract breaks below ₹205 without moving up to ₹215, consider initiating shorts for that remaining 25 per cent post the breach of the support at ₹205. Keep initial stop-loss at ₹218.

The nearest support is at ₹186, and subsequent support is at ₹170.

When the contract falls to ₹186, exit three-fourths of the shorts and then tighten the stop-loss to ₹195. Exit the leftover shorts when the contract declines to ₹170.

Published on

July 06, 2022

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