The key observation to be made on the price chart of Aluminium is that the price movement of
this base metal since 28th Jan, 2011 has taken shape of a bearish Head & shoulders pattern.
TheHead & shoulders pattern has severe negative implication on the future price movement of a
stock/ index/ commodity price.
The neckline support for the said pattern is placed at the Rs 111.90 levels. A break below this level will lead to an increase in supply and the price of aluminum could then test the levels of Rs 110.25 / Rs 109 levels in the near term.
Some of the other technical factors that support the bearish argument outlined above are that the price have closed below its 200 DMA during the previous session and the MACD indicator has also given a sell signal backed by a negative divergence.
We recommend traders to sell on a break below Rs 111.90 levels with a stop loss of Rs 113.55 levels for the above mentioned near term price targets.
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