Wednesday, March 11, 2015

MCX aluminium (₹111.85/kg): Sell

MCX aluminium (₹111.85/kg): Sell
Aluminium has tumbled some 16 per cent since November last year. The global spot aluminium price recorded a high of $2,099 per tonne in November and fell to $1,765 . Declining demand for the metal due to the global slowdown, especially in China, has taken the aluminium price sharply lower.

Aluminium futures on the Multi Commodity Exchange (MCX) which move in tandem with the global price have tumbled about 15 per cent in the same period. The contract has been consolidating sideways since January within its overall downtrend. It is likely to extend its fall in the coming weeks, making it advisable to initiate fresh short positions.
Short-term view: Aluminium futures have been range-bound between ₹110 and ₹117 a kg since January. The 200-week moving average, currently at ₹110.5, is providing support for the contract. Though the sideways range remains intact at the moment, the price action on the daily chart suggests that the range is likely to be broken on the downside in the coming days.
Immediate resistance is at ₹113.5. Key short-term resistance is at ₹117 – which is the upper end of the current sideways range in which the contract is trading now. The short-term outlook is bearish as long as the contract trades below these resistances. A strong break below the support ₹110 can drag the contract lower to ₹106 in the short-term.
Traders with a short-term perspective can initiate fresh short position at current levels. Stop-loss can be placed at ₹114 for the target of ₹106. The outlook will turn bullish only on a strong break above ₹117. The next target is ₹118.5.
Medium-term view: The medium-term trend view is also bearish with key resistance at ₹118.5. The contract can fall to ₹104. Medium-term traders can go short with a wider stop-loss at ₹116 and for the target of ₹105. Intermediate rallies to ₹115 if seen can be used to accumulate short positions.
The level of ₹104 is a key medium-term trend-line support for the contract which has the potential to halt the current downtrend. A reversal from here can take the contract higher to ₹115 once again.

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