MCX-Aluminium: Can see a corrective bounce

The Aluminium Futures contract (₹202.50 per kg) has been in a strong downtrend since mid-October. The contract made a high of ₹259 per kg on October 18 and has tumbled about 22 per cent from there. This downtrend is coming near key trend support poised at ₹198. The chances are high for the MCX-Aluminium contract to bounce back from this support and see a corrective rally to ₹207-₹208 or ₹210 this week. However, the broader trend will continue to remain down.

A complex head and shoulder reversal pattern is also visible on the chart. The neckline resistance is also poised in the ₹208-₹210 region. As such, a rise past ₹210 looks less likely. The contract can consolidate between ₹198 and ₹210 for some time. Thereafter it is more likely to break ₹198 and resume the downtrend, targeting ₹187-₹185 on the downside. Traders can wait for a rise and go short at ₹206 and accumulate at ₹209. Stop-loss can be placed at ₹214. Trail the stop-loss down to ₹203 as soon as the contract moves down to ₹197. Move the stop-loss further down to ₹198 as soon as the contract moves down to ₹193. Book profits at ₹190.

The outlook will turn bullish only if the contract breaks above ₹210 decisively. Such a break can then take the contract up to ₹220-₹225 again. Such a rise will also mark the beginning of a fresh leg of uptrend.

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