The trend has been bullish for aluminium futures since August last year. The contract established an uptrend on the back of the support at ₹208.
After some consolidation in November and December last year, aluminium futures began its latest leg of uptrend in January, broke out of the barrier at ₹248 and went on to mark a high of ₹266.75 last week.
But now, the price has moderated, and the contract closed at ₹258.10 on Monday.
However, the broader uptrend remains true, and the near-term outlook will change only if the contract slips below the potential support at ₹256. From the current level, we expect aluminium futures to touch ₹270.
In case the contract slips below the support at ₹256, it can extend the decline to ₹248. A breach of this can trigger a fall to ₹236.
Trade strategy
Go long on aluminium futures (March) at ₹257 and place a stop-loss at ₹252. Book profits at ₹270. After initiating the trade, when aluminium futures rises to ₹265, trail the stop-loss to ₹260.