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The markets witnessed a higher turnover last week as traders participated amid the volatility and the low base effect of the previous week (when holiday sentiment had kept volumes low). The week-on-week market-wide turnover on the MCX rose 34% while open interest rose 1%.

The MCX turnover gainers during the week were aluminium, copper, crude oil, gold, lead, mentha oil, natural gas, nickel, potato, silver and zinc. The open interest gainers were aluminium, cardamom, gold, lead, mentha oil, potato, silver and zinc.
The US non-strategic petroleum reserves were higher by 2.2 million barrels at 329.7 million barrels. Stronger risk appetite for financial assets and a stable greenback eased safe haven buyingin bullion.

Agri commodities
Mentha oil has rallied strongly after a few weeks of consolidation. The immediate outlook appears to point towards a bear squeeze as the open interest has risen marginally. Watch the Rs1,450 level as a sign of resistance in the prompt month series. Should the price trade sustain below Rs1,365, weakness may set in again. Market internals indicate a 38% increase in turnover and a 2% increase in open interest.

Potato has rallied on the back of a smart rally in turnover and some expansion in open interest as the weekly close is at its highest since the week ended November 19, which indicates traction in the bullish sentiment. Existing long positions, if any, may be held for now. Market internals indicate an 89% increase in turnover and a 4% increase in open interest.

Sugar M Kol has declined, albeit with a sharp decline in volumes, indicating an absence of panic selling in the markets.

Adventurous traders may attempt to buy small lots around Rs2,750 with the objective of booking profits at higher levels in the near term. Market internals indicate a 62% decrease in turnover and a 27% decrease in open interest.

Metals
Aluminium has indicated underlying strength as the week-on-week gains were maintained for a fortnight, though the advocated Rs110 level proved to be a nemesis of the bulls. A clear close above this threshold is required to indicate a confirmed breakout, provided open interest rallies in tandem with the prices. Maintain a bullish bias for now. Market internals indicate a 66% increase in turnover and a 20% increase in open interest.

Gold dipped mildly as was anticipated last week, but the downside potential is limited as the market internals seem to indicate a pullback before clarity emerges on trend determination. The prompt month series need to trade consistently above Rs28,250 if the upthrust is to sustain. Fresh buying is recommended only after this breakout. The weekly candle chart indicates a bullish piercing pattern as the bullish candle has pierced over 90% of the prior week’s bearish one. Follow-up buying will determine the upside potential in the near term. Market internals indicate a 29% increase in turnover and a 1% increase in open interest.

Silver has consolidated but remained under pressure as the bulls cut positions on price declines. The near-term outlook appears to be under mild pressure as safe haven buying has eased on the back of fund flows into financial markets. The possibility of a violation of the Rs50,000 psychological support cannot be ruled out for now. Market internals indicate a 28% increase in turnover and a 1% increase in open interest.

Energy
Crude oil has rallied in spite of the rising inventory as the Iran sanction imbroglio kept sentiment firm. The Rs5,375 hurdle has been overcome and bulls will need to defend this threshold if the upthrust is to sustain. Should the price decline below Rs5,275 on a sustained closing basis, a reversal in sentiments may be seen.

For now, hold a bullish bias. Market internals indicate a 47% increase in turnover and a 4% decrease in open interest.
Natural gas has exhibited a small-bodied bullish candle with sizable shadows on both ends (spinning top) which indicates a near equilibrium between the bulls and the bears in the absolute short term. The overall outlook will remain cautious as long as the price is below Rs170, but the jump in volumes indicates that the bears may have run out of steam too. Expect a smaller range in the coming week. Market internals indicate a 67% increase in turnover and a 15% decrease 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.