Aluminum, which has lost 12 percent this year, may decline further about 13 percent after prices failed to rise above a 200-day moving average, according to technical analysis by Commerzbank AG.
The metal reached last week resistance at the April high of $1,946 a metric ton and the 200-day moving average of $1,945.61, Karen Jones and Axel Rudolph, London-based technical analysts at the bank, wrote in a report Aug. 28. Resistance refers to levels where sell orders may be clustered.
Prices have since traded below those levels and may extend losses to the 55-day moving average of $1,830.86, they said. If prices fall below the June low of $1,758, the lowest since July 2009, the metal may then drop to $1,605, the analysts said.
“We continue to view aluminum as vulnerable on the downside from a longer-term perspective,” they said.
Aluminum for delivery in three months on the London Metal Exchange was little changed at $1,833 at 2:26 p.m. in Shanghai.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price direction. Support areas are marked by clusters of buy orders. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a new high or low.