The price of January futures contract of Aluminium on Multi Commodity Exchange (MCX), which was on a rally since late October from about ₹143, entered consolidation mode in December. That is, it started to oscillate within the price band of ₹162 and ₹168.
Just when the contract started to look weak, the price broke below the lower boundary of the range, indicating a potential shift in the trend to downwards. However, bulls put a strong fight and as a result, the contract bounced off ₹160 – its 50-day moving average – on Monday. This is backed by good volume hinting at the uptrend regaining traction.
Substantiating the positive bias, the relative strength index, which already remains in the bullish zone, is showing a fresh uptick. Likewise, the moving average convergence divergence indicator on the daily chart, which has been tracing a downward trajectory over the past couple of weeks, is exhibiting signs of the bulls gathering momentum.
Thus, as long as the price stays above the support at ₹160, the trend will be inclined to bullish. From the current levels, the nearest resistance the contract can face is at ₹168. A breakout of this level can intensify the rally potentially lifting the contract to ₹175. But if the rally loses strength and falls below ₹160, the short-term outlook can turn negative. Support below ₹160 are at ₹158 and ₹154.
Since the overall trend is bullish and the contract has rebounded strongly, traders can buy the contract with stop-loss at ₹160.
This article is auto-generated by Algorithm Source: www.thehindubusinessline.com
