The aluminium price continued its recovery in the past week. The November futures contract of the metal on the Multi Commodity Exchange of India closed with a gain last week, a second consecutive positive weekly close. Though it is a considerable sign of recovery, the contract needs to close above ₹136 for it to be sustainable. Since it is trading at a supply zone between ₹135 and ₹136 and hovering around the 50-DMA, the price action needs to be monitored closely for its reaction. Factors that are in favour of the contract is the rising daily relative strength index and a positive moving average convergence divergence indicator.

Corroborated by short-term bullishness, if the recovery in futures price manages to break out of ₹136, it will most probably appreciate to ₹141. Also, a decisive close above ₹136 might change the medium-term trend into a bullish one. However, on the back of resistance, if the contract attracts selling, it could weaken to ₹133. Below that level, the support is at ₹130.

After a considerable bull run, which resulted in price breaching above $1,800, the three-month rolling forward contract of aluminium on the LME moderated in the past week. It faces a significant resistance at $1,825, from where the price started to soften. On the downside, it has supports at $1,800 and $1,782. Alternatively, further appreciation from current level will face hindrance at the prior high of $1,825, beyond which there is a resistance around $1,850.

Even though the contract has staged a recovery, the price of MCX-Aluminium futures is facing a strong resistance at current levels. So, fresh long positions can be considered only if the contract decisively closes above ₹136.

But since it is trading at a substantial resistance level, traders with risk appetite can sell the futures contract with tight stop-loss as risk-reward ratio seems to be in favour of short at current levels.

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