Aluminium Charts Show Bullish Trends but High Volatility, Religare Analyst Suggests Trading Strategy
Aluminium prices have surged in recent weeks. The rally comes amid a sharp global supply squeeze triggered by geopolitical tensions in the Middle East. Investors are now watching the metal closely as it shows strong bullish signals, though experts warn of high volatility.
Ajit Mishra, an analyst at Religare Broking, says the trend for aluminium remains positive. He points to thin inventories and structural deficits as key factors supporting the price rise. However, he cautions that volatility is high, making the market risky for unprepared traders.
What Is Driving the Aluminium Rally?
The main reason for the price surge is a supply squeeze. Geopolitical tensions in the Middle East have disrupted production and shipping routes. This has reduced the amount of aluminium available in global markets.
At the same time, inventories of aluminium are very low. Stockpiles in major exchanges like the London Metal Exchange have fallen sharply. This creates a situation where even a small increase in demand can push prices higher.
Structural deficits also play a role. For years, the aluminium industry has faced underinvestment in new production capacity. This means supply cannot easily keep up with demand, especially when economies recover or grow.
Bullish Trend with High Risk
Mishra describes the overall trend as bullish. This means prices are expected to rise over time. But he also warns that volatility is high. Prices can swing up and down quickly, which can lead to big losses for traders who enter at the wrong time.
For example, aluminium prices have seen sharp jumps of 5% or more in a single day, followed by equally sharp drops. This kind of movement is common when markets are driven by news about geopolitics or supply disruptions.
Investors should understand that high volatility increases risk. It also creates opportunities for those who use proper risk management, like stop-loss orders.
Religare Analyst Recommends Buying on Dips
Given the bullish trend, Mishra suggests a specific trading strategy. He recommends buying on dips. This means waiting for the price to fall temporarily before entering a long position.
He identifies key support levels for aluminium. The first support is at Rs 348–350 per kilogram. This is the price range where buyers are likely to step in. If the price falls below this level, it could signal a deeper correction.
Mishra also advises using a stop loss at Rs 335. A stop loss is a pre-set price at which you sell automatically to limit losses. If aluminium falls to Rs 335, it would mean the bullish trend has broken, and it is safer to exit.
Example of the Strategy in Action
Imagine aluminium is trading at Rs 360. According to the strategy, you would wait for a dip to around Rs 348–350. You buy at that level. Then you set a stop loss at Rs 335. If the price rises, you can hold for gains. If it falls to Rs 335, you exit with a small loss.
This approach helps you enter at a better price while protecting against sudden drops. It is a common method used by traders in volatile markets.
What Should General Investors Do?
For general investors, aluminium can be a good addition to a diversified portfolio. But it is not a low-risk investment. The metal is sensitive to global events, economic data, and currency movements.
If you are new to commodity trading, start with small positions. Use stop losses as recommended. Do not invest money you cannot afford to lose. Keep an eye on news about the Middle East and global supply chains, as these will continue to drive prices.
In summary, aluminium shows strong bullish trends due to supply shortages and low inventories. But high volatility means you must trade carefully. Following a strategy like buying on dips with clear support and stop-loss levels can help manage risk.
