Commodity Radar: Aluminium prices down 12% from peak, trade below key moving averages. Time to buy, says Religare analyst

Aluminium prices were trading in the green on the MCX in Wednesday's session. The February futures hit the day’s high of Rs 317, rising 0.8%. The base metal has slipped from its peak and now offers favourable risk-rewards to make a move.

The domestic prices took cues from positive trends in Asian markets as the aluminium futures on the Shanghai Futures Exchange (SHFE) were up 1.55% today, rallying on China's plans to increase strategic reserves in copper, lifting metal prices. However, prices on the London Metal Exchange (LME) were flat even as the bias was positive.

Ajit Mishra, Senior Vice President, Research at Religare Broking, said that aluminium futures in the UK had shown a sharp retreat from the over-three-year high, tracking the aggressive pullback for base metals as traders reconsidered their speculative positions. The moves happened in response to a rebound in the dollar as well, he reasoned.


However, the global supply remains limited post China attaining its 45 million output cap last year, and Chinese smelters showing reluctance in starting new operations in Indonesia.

“Therefore, it is mainly the limited availability factor that continues supporting the market. Over the past 4 weeks, Aluminium gained roughly 4%, and in the last 12 months, it increased by 20.10% approximately,” Mishra said.

Technical outlook

The Religare analyst said that aluminium at MCX has witnessed a healthy correction after testing a high of 361.25. In his view, the broader framework clearly indicates continuation of the upward trend in the coming weeks.

Aluminium trading strategy

The prices are ruling significantly above the key exponential moving averages, and also above an intermediate support region of 305-310. All in all, the potential to resume the upside move towards the level of 335/340 is expected moving forward. There is a strong support base around the 295-298 level.

Look for stability above 310 for buying with the target objective of 335 with a stop loss below 294.

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