Aluminum May Fall to $1,743, Barclays Says: Technical Analysis

LONDON, June 17 -- Aluminum may continue to fall toward $1,743 a metric ton, according to technical analysis by Barclays Capital, implying a potential 12 percent drop from current prices.

The attached chart shows that while the lightweight metal rose above its April-to-June downward trend line, prices may decline toward the September and October lows of about $1,776 a ton. A drop to $1,743 would equal a 61.8 percent retracement of the rally from February 2009 to April this year, one of the levels singled out in so-called Fibonacci analysis.

"Despite the recent strength, we continue to think that higher prices are a corrective process which, when complete, should lead to renewed weakness toward $1,776/$1,743 in the weeks ahead," Barclays analysts including MacNeil Curry wrote in a report. "Bigger picture, it would take a move back through the 200-day moving average to indicate basing."

Aluminum for three-month delivery on the London Metal Exchange gained 3.4 percent last week, the first weekly climb in a month, and traded at $1,991 a ton at 10:31 a.m. local time today. The metal, used in industries from packaging to aerospace, is down 11 percent this year. Its 200-day moving average is at about $2,098.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.