Commodity Radar: Aluminium charts show bullish trends, but high volatility. Religare analyst suggests trading strategy

Aluminium prices have surged to the Rs 380 per kg mark on the MCX, driven by a sharp supply squeeze following escalating geopolitical tensions in the Middle East. Disruptions from Iranian strikes on key smelting infrastructure have heightened fears of prolonged supply shortages, especially with the region accounting for a significant share of global output.

While thin inventories and production risks continue to support the uptrend, the rally remains highly sensitive to any signs of geopolitical de-escalation, which could trigger swift profit booking. Nonetheless, the broader outlook stays constructive as long as the structural supply deficit persists.

The May aluminium futures traded lower on Tuesday on the MCX, declining by half a percentage point to hit the day's low of Rs 373.65 as global cues remained negative. The three-month contract on LME was down 0.4% and traded at $3,578 around 2 pm India time.


Ajit Mishra, Senior Vice President, Research at Religare Broking, said the current rally is driven by recent global supply shocks, specifically the disruptions in the Middle East after Iranian missiles hit the smelters. The supply-squeeze rally has pushed prices above the 360 mark in the previous week, he added.

“The current volatility is triggered by the geopolitical events; therefore, any sudden de-escalation news in the Middle East could cause a sharp long liquidation, resulting in a rapid price drop since the traders will prefer booking profits. Nonetheless, as long as the structural supply deficit continues, the holistic view shall remain positive,” Mishra said.

Iran has struck targets in all GCC countries, driving major producers to stop aluminium refining activity and risking the suspension of operations in the region that produces 10% of global supply. Qatar has halted its aluminium operation, while major facilities in the UAE and Bahrain are vulnerable to further attacks and power interruptions from strikes on energy infrastructure.

Additionally, the LME and MCX warehouse stocks are near multi-year lows, the Religare analyst highlighted, adding that the inventories are thin and even a small buying order or minor news of fresh escalation of the Iran-US conflict can cause outsized price spikes.

Technical outlook

Decoding the charts, Mishra said, the existing patterns exhibit a powerful bullish breakout following a long period of consolidation. The price is riding the upper band, signifying extreme bullish momentum, he said, adding the upward trend is intact also because MCX Aluminum prices are ruling significantly above the key exponential moving averages.

Aluminium trading strategy

Mishra said weekly charts convey the possibility of reasonable gain from current levels, as long as the daily closing remains above the 335 support.

He suggests buying on dips around an immediate support region of Rs 348-350, and aims for targets of Rs 370-372 with a closing stop loss of Rs 335.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)