Aluminium futures has been in an uptrend since August last year. It started scaling higher after finding support at ₹208. The latest leg of the rally began early this year.
The February futures started to rally on the back of the base ₹238 in the first week of January. It continued to move up and in the early trade on Tuesday, it hit a high of ₹262.20.
Although the trend is bullish, there is a good chance for a price correction, possibly to ₹258, a support. Just below this is another support at ₹254, where both 21- and 50-day moving averages coincide. Hence, the region between ₹254-258 is a support band. Below this, ₹246 is a good base.
Nevertheless, we expect aluminium futures to moderate to ₹254-258 price band and resume the uptrend. This upswing can lift the contract to ₹270, a potential resistance. Subsequent resistance is at ₹285.
Trade strategy
Buy aluminium futures (February) if the price dips to ₹256. Place stop-loss at ₹250 at first. When the contract rises to ₹265 after the trade is initiated, revise the stop-loss to ₹260. Book profits at ₹270.