The levels between Rs 105 to Rs 112.50 have been the broad trading range for the price of aluminium for the past few sessions of trade. But, the key observation to be made on the chart above is the formation of a bearish Head & shoulder price pattern within this trading range.
Traders would note that the formation of this pattern is an extremely bearish sign and can lead to severe correction in the future price movements of an index/stock/commodity. The neckline support for the said pattern in placed at the Rs 106 levels. We believe that the price can correct to its neckline support levels in the near future.
Another technical factor that confirms the bearishness depicted by the price action is the sell
signal given by the RSI indicator backed by a negative divergence.
We recommend traders to sell below Rs 107.35 levels with a stop loss placed above Rs 108.85 levels
for downside targets of Rs 106 / Rs 104.75 levels.
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