Aluminum futures: Save the shorts

Aluminum futures on the Multi-Exchange (MCX) witnessed a reversal of the downward trend in early March, after reaching a peak of ₹325.4. It has been in decline since then, although there have been several corrective rallies.

The last stage of the decline in prices began about a month ago at about 250 rupees. Since then, we have been offering short positions with a potential target of ₹ 200, a significant level of support.

It is currently trading at around ₹ 214, the contract is approaching this base, from where there may be a rebound. Thus, traders can get out of shorts when the price falls to the price range of ₹ 200-205. Maintain a stop loss of 225 rupees for these positions.

A rally on the back of support at ₹ 200 could bring the contract to ₹ 225. Moving above that level could raise it to ₹ 242, where the 50-day moving average is currently located. A break of 242 rupees is less likely and the contract could start consolidating after that.

On the other hand, if support at ₹ 200 is invalid, this may reverse the medium-term trend downwards and may decline rapidly to ₹ 186, the closest support level. Subsequent maintenance is ₹ 178.

In general, our recommendation is to eliminate all shorts when the price drops to ₹ 200. New deals can then be made based on how the contract responds to the 200 rupee support.

Posted on

June 20, 2022

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