Overseas aluminum premium hits a 19-year high, technical analysis of China Hongqiao and Chalco

Significant production cuts in Middle Eastern aluminum industry drive overseas premium to highest level in 19 years, China Hongqiao $CHINAHONGQIAO (01378.HK)$and$CHALCO (02600.HK)$ Contrarian high opening of 6.5% and 5.2%.

Observing the moving average structure, China Hongqiao's stock price is still constrained by the 30-day and 60-day moving averages, which stand at 36.64 yuan and 36.17 yuan respectively, indicating that the medium-term trend has not yet fully reversed. The 5-day volatility reached 14.8%, significantly increasing, providing swing trading opportunities for short-term traders. Technical charts show that the stock is currently in a clear range-bound trading pattern. The primary support below is at 32.1 yuan, near the recent low platform region; if it breaks down effectively, the next support will be tested at the 28-yuan level. The first resistance above is at 37.3 yuan, near the upper edge of the recent trading range; if it breaks through, it will further challenge the mid-term resistance at 41 yuan. The current stock price is in the middle region between support and resistance, with short-term direction depending on the outcome of the bulls' and bears' battle at key price levels.

Various technical indicators present a divergence of 'short-term bullishness, medium-term weakness'. The Stochastic Oscillator (KDJ) has issued a golden cross buy signal, while the VR volume ratio indicator shows 'severe oversold conditions, possible bottoming'. The Rate of Change (ROC) and Bull-Bear Power indicators both give buy signals, with the Relative Strength Index (RSI) reporting 44, rebounding from a low position showing some relief in selling pressure. Meanwhile, the ADX trend indicator, Ichimoku Cloud, and MACD continue to maintain sell signals. Bollinger Bands are narrowing and prices are below the middle band, reflecting that the medium to long-term trend has not yet fully reversed. The overall technical indicator summary signal is 'buy', with a strength rating of 10, indicating that short-term technical aspects have accumulated some rebound momentum. In the derivatives market, the previous trading day saw a divergence in China Hongqiao’s positioning, with bullish positions seeing net outflows of 247,000 yuan and bearish positions seeing net inflows of 2,118 yuan, reflecting continued market division regarding future trends, with funds remaining generally cautious.

The share price of Chalco also failed to break through the resistance of the medium-term moving average, with the 30-day moving average (RMB12.93) and 60-day moving average (RMB13.10) showing a bearish arrangement, confirming that the medium-term trend remains in a downtrend channel. The key price boundaries for the current stock price are clear: the primary support below is RMB10.10, a historically low area; if it breaks down, the next support will be at RMB8.40. The first resistance above is RMB12.20, a psychological integer level coinciding with the short-term downtrend moving average. If broken, the next challenge will be the 60-day moving average resistance at RMB13.70, which is the key point to determine whether the mid-term trend can reverse.

Technical indicators also show the characteristics of 'short-term recovery, medium-term weakness.' The CCI is clearly in the oversold zone and has issued a buy signal. The bull-bear power indicator shows a buy signal, and the Relative Strength Index (RSI) value is 32, close to the oversold region, indicating selling pressure has been fully released. Stochastic oscillators, momentum oscillators, and rate-of-change indicators all give a 'neutral' interpretation, suggesting downward momentum is easing. However, MACD, Ichimoku Cloud, and Bollinger Bands still maintain sell signals, indicating any initial rebound should be viewed as technical recovery rather than a trend reversal. The overall technical indicator summary signal strength is 9, with an assessed probability of rising at 53%; the strength and sustainability of the short-term rebound still need verification. In the derivatives market, Chalco showed a significant inflow tendency in the last trading session, with bullish positions seeing a net inflow of RMB196,000 and bearish positions a net outflow of RMB50,000, reflecting bullish funds beginning to actively position themselves with stronger expectations for a rebound.

Investment Strategy and Risk Warning

For short-term operations, China Hongqiao can consider light positions above the support level of RMB32.1, targeting the first resistance level at RMB37.3. If it effectively falls below RMB32.1, exit with a stop-loss. For Chalco, moderate participation in oversold rebounds can be considered above the support level of RMB10.1, targeting the resistance level at RMB12.2; if it falls below RMB10, exit with a stop-loss. Medium-term investors should wait until both stocks break through their respective 60-day moving average resistances before participating: China Hongqiao needs to stabilize above RMB37.3, and Chalco needs to break through RMB13.7 to confirm a trend reversal before increasing allocation.

Investors need to be wary of three core risks: First, geopolitical risks—if tensions in the Middle East ease quickly and damaged aluminum plants resume production early, it will lead to unmet expectations for rising aluminum prices. Second, policy risks—relaxation of domestic electrolytic aluminum production capacity control policies or weaker-than-expected demand will suppress upward potential for aluminum prices. Third, market risks—a recession in overseas economies leading to a sharp decline in aluminum demand will pressure sector valuations.

If optimistic about Chalco, one may consider Huatai call warrants (13746), with an exercise price of RMB12.2, offering the highest leverage of 3.2x on the market, and implied volatility at a relatively low level, resulting in smaller time value decay, suitable for capturing potential upside moves toward the first resistance level. For lower-cost rebound plays, Bank of China call warrants (21903) are another option, with an exercise price of RMB12.28, slightly lower leverage of 3.6x, but the lowest premium and implied volatility among similar products, offering better downside protection.

For those holding a pessimistic view, consider Citi put warrants (23878), with an exercise price of RMB8.88, providing 3x leverage, and its implied volatility level is considered ideal for effectively tracking declines in the underlying stock. Another option is J.P. Morgan put warrants (24098), with an exercise price of RMB8.87, whose premium and implied volatility are also the lowest in the market, allowing for relatively controllable cost losses if the direction is misjudged.

For investors optimistic about China Hongqiao's prospects, consider Bank of China call warrants (21725), with an exercise price of RMB36.68 and leverage of approximately 6.1x. This product’s advantage lies in the highest leverage level and lower implied volatility, effectively amplifying potential returns while reducing cost pressures from volatility. Another Huatai call warrant (20534) is worth noting, with an exercise price of RMB36.66 and leverage of about 6.6x; its premium and implied volatility are among the lowest in the market, suitable for investors seeking steady participation in stock price increases. Regarding bull certificates, Societe Generale bull certificate (62508) has a stop-loss price set at RMB30, with maximum actual leverage around 6.6x.

Faced with the two targets, China Hongqiao and Chalco, do you prefer a higher elasticity variety or a more stable industry leader? Is the current investment logic for the aluminum sector leaning towards short-term trading or mid-to-long-term positioning, and how would you set your portfolio proportions?

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Reminder: This article does not constitute any investment advice.

This article is for reference only and does not constitute any investment advice. The market data, opinions, and analysis contained herein may change at any time without prior notice. We are not responsible for any loss or damage caused by reliance on the information in this article. Technical analysis only shows whether certain technical conditions are met; a comprehensive assessment of asset performance should be conducted using additional data. Decisions to trade should not be based solely on this article. Please note that past performance is not indicative of future results.

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