The Bull Run for Aluminum Might Be Over

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Aluminum prices have been in the spotlight since the beginning of the year.

Since June 2016, aluminum prices have risen. However, for the past three months, they have traded somewhat sideways.

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Source: MetalMiner analysis of fastmarkets.com data

From a technical perspective, aluminum prices are trading in what is called a wedge formation, with prices fluctuating between the two main blue lines drawn in the chart above. Because the top line descends from a previous uptrend, which characterizes a bull market, this movement could suggest a market top. By observing aluminum prices this month, the market will show us whether aluminum has reached the top of its bull run and will fall, or if it will continue to rise.

If prices fall below the bottom blue line, it will signal to us that a major trend reversal has started. We would also expect to see heavier trading volumes for any shifts in trend. If not, prices will likely continue to move in a sideways direction. This statements works for both the upper and lower limits.

These types of triangle trading patterns show us when to buy on the dips when prices appear in their lower limit. Aluminum has counted two buying dips since prices began to fluctuate in May and June. As prices fluctuate between the triangle limits, a potential third dip could appear if prices retrace to $1,865.

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What This Means for Industrial Buyers

Although industrial metals remain bullish, commodities have shown a recent downtrend revealing price weakness.

Buying organizations that need to make aluminum purchases would do well by monitoring aluminum prices closely and taking action if prices break move outside the blue lines, as discussed in detail in our Monthly Metal Buying Outlook.

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