LME aluminium may retreat to $2,089 before rising in Q2

SINGAPORE: LME aluminium may retreat to a support at $2,089 per tonne before retesting a resistance at $2,237 next quarter, as suggested by a retracement analysis.

The support and the resistance are identified as the 50% and the 61.8% retracements on the downtrend from $2,718 to $1,460.

Given that the metal started a decent correction when failing to break $2,089 in December 2020, it may have started another similar correction towards $2,089, following a false break above the resistance at $2,237.

The resistance is working closely with the one at $2,267, a high touched in Oct. 2018 and the peak of a wave B. Either of these resistances could trigger a deep correction. When joining hands, they form a solid resistance zone.

The subsequent correction could be deeper than the one from the December 2020 high of $2,096. Even though a target of $1,941 looks too aggressive to be realistic right now, it will be confirmed when the metal breaks below $2,089.

A continuation of the uptrend will only confirmed when alumiminium breaks $2,267. Such a break could open the way towards $2,421.

The uptrend from $1,460 consists of many impulsive waves. This wave mode suggests a huge upside potential. There are alternate wave counts which are more bullish than the current one.

The uptrend is expected to be steady after the coming correction. On the daily chart, the correction might be driven by a wave 4, which is travelling towards the bottom of the wave iv around $1,941.

Daily RSI formed kind of bearish divergence, which is not typical but good enough to tell the exhaustion of the rally. A shallow correction may end around $2,089, while a deep one could extend to $1,941.

The analysis is published once a week on Monday.

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