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Markets witnessed higher turnover last week as traders displayed a higher participation bias. The week-on-week market-wide turnover on the MCX rose 1%. The market-wide open interest rose by 4%. The MCX turnover gainers during the week were aluminium, cardamom, copper, cotton, crude oil, mentha oil, natural gas, nickel, potato and zinc.

The open interest gainers were aluminium, cotton, copper, crude palm oil, gold, lead, mentha oil, natural gas, nickel, potato and sugar.

The US non-strategic petroleum reserves were higher by 5 million barrels at 334.6 million barrels. The action is shifting to base metal counters as the last fortnight shows polarisation of activity around industrial commodities. The safe-haven buying in bullion is easing as the US economy and the greenback show resilience. Oil prices are likely to be volatile with a downward bias for now.

Agri commodities
Mentha oil has logged all-time highs as the bears were forced to cover shorts and the bulls were aided by the weather. The Rs1,440 level will be a near-term support that needs watching, even as the possibility of a fresh upthrust cannot be ruled out. Hold existing longs, if any. Market internals indicate a 92% increase in turnover and a 17% increase in open interest.

Potato has rallied on the back of a sharp spike in traded volumes, indicating a strength in the undertone for the commodity. The probability of a routine profit-taking bout aside, the outlook remains optimistic and bulls may retain longs for now. Market internals indicate a 210% increase in turnover and a 23% increase in open interest.

Sugar M Kol has declined for the fourth week in a row and the near term outlook remains that of profit-taking. The Rs2,750 level remains a significant support area to watch out for, and aggressive traders may even attempt small-sized buys at this level. Market internals indicate a 5% decrease in turnover and a 22% increase in open interest.

Metals
Aluminium has shown relative strength as the bulls gained for the third week in a row. The Rs110 level will be a rough-and-ready pivot in the coming week, whereas the Rs112 level will be a resistance point that the bulls must overcome if the rally is to get stronger legs. Hold a long bias for now. Fresh buying may be contemplated above a confirmed breakout over the Rs112 hurdle. Market internals indicate a 79% increase in turnover and a 3% increase in open interest.

Copper has encountered resistance at the bearish trend-line on the weekly charts at the Rs415 level. A sustained trade above this level will embolden the bulls to enhance their exposure. The Rs425 level is a last-mile hurdle above which a bear squeeze may commence. On the flip side, any sustained trade below Rs395 will mean all bullish bets are off for now. Hold existing longs for now. Market internals indicate a 30% increase in turnover and a 27% increase in open interest.

Gold is seeing a slow easing of trader interest as the action shifts to base metals and riskier assets. This week, watch the Rs27,200 level as a short-term support and Rs28,000 as a resistance. Await a clear breakout / draw-down before initiating fresh trades. Market internals indicate a 14% decrease in turnover and an 8% increase in open interest.

Silver has witnessed an inside pattern as the weekly range was contained within the previous weeks range and the volumes and open interest contracted. These are indications of a market which is seeking direction even as the action is shifting to higher risk assets. Market internals indicate a 6% decrease in turnover and a 7% decrease in open interest.

Zinc has rallied within a bearish channel and is likely to encounter resistance near the Rs103 level on the upside. The counter is relatively weaker as compared to nickel, aluminium or even copper in the base metals pack. Await a sustained trade above the Rs105 level where bullish confirmation will be received, before buying afresh. Market internals indicate a 22% increase in turnover and a 19% decrease in open interest.

Energy
Crude oil has retraced from the peak as the rising non-strategic inventory in the USA and contingency plans to source oil from alternate sources in case the Iran imbroglio intensifies, helped eased compulsive buying. As long as the price stays below the Rs5,275 level, the outlook will remain cautious. Avoid aggressive buying for now. Market internals indicate a 7% increase in turnover and a 7% decrease in open interest.

Natural gas has fallen in tandem with crude oil as the bulls surrendered longs on the back of a persistent attrition in prices. The downfall may see a temporary halt as the price is approaching the Rs118 recent low. While a pullback may occur in the near term, a complete trend reversal may be some time away. Market internals indicate an 18% increase in turnover and a 53% increase in open interest.

The writer is the author of A Traders Guide to Indian Commodity Markets and can be reached at vijay@BSPLindia.com Fair disclosure: The analyst has exposure to mentha oil.