At the end of last week, aluminum quotes managed to break the downtrend, which caused a price decrease of almost 15% in a month and a half. The rebound was supported both by more positive news and technical factors: the RSI indicator turned up right at the entrance to the oversold zone, which further strengthened aluminum's growth momentum. The first upswing’s target of the 23.6% Fibonacci level (2360) was successfully reached, then the path to the 38.2% Fibonacci level (2420) was opened.
The situation in the aluminum market is improving step by step. Demand for the metal from China, its largest consumer, grows, while stocks are shrinking. Aluminum is one of the main metals used in the automobile industry, which is rebounding after years of serious supply chain problems. This could provide good support for aluminum prices.
China Association of Automobile Manufacturers (CAAM), in February, reported an increase in production and sales of cars by 11.9% and 13.5%, respectively, year-on-year and by 27.5% and 19.8% compared to January 2023. The European passenger car market also showed good performance in February — 802,763 units of new vehicles (11.5% more than last year).
Also, it is necessary to remember the stable demand for aluminum from the renewable energy sector. The global energy crisis has accelerated the pace of the transition to renewable energy sources and increased the demand for aluminum in this segment of the industry. The global demand for primary aluminum is projected to grow to 97 million tons from the current 69 million tons, i.e., more than 40%, by 2030.
Buying aluminum around 2360 looks like an interesting option, with a further target to reach 2420. The RSI is still far from being overbought, and it doesn't prevent aluminum prices from further growth.
We may offer you the following option of trading strategy:
Buy aluminum in the range of 2350 - 2370. Take profit — 2420. Stop-loss — 2320.
Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.
This content is for informational purposes only and is not intended to be investing advice.
