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ShareLast week, turnover on the Multi Commodity Exchange rallied 14% week-on-week.The market wide open interest fell 1% as the expiry in gold and base metal counters triggered some attrition in positions. Base metals rallied as the hopes of a stimulus package rose in the US. Energy commodities found buyers at lower levels. Bullion consolidated after a sterling performance in the last fortnight.
I expect the first half of this week to witness some trickle-down buying momentum from the previous week, especially in base metals. Follow-up buying or lack of it thereafter, will determine the trend in the latter half of the week.
Agri-commodities
Chana witnessed a reversal as the previous week's gains were erased. The bulls preferred to book profits on advances and the rally may commence only above the Rs 2,400 level. Till then, wait and watch. Market internals indicate an 11% decline open interest.
Mentha oil continues to remain under pressure and the bull will get a reprieve only above the Rs 540 level on high volumes. Market internals indicate a 29% decline in turnover and a 34% fall in open interest.
Potato witnessed profit sales as it approached the Rs 640 congestion area. Bulls should initiate fresh longs only above this threshold. Till then, watch the Rs 570 level for support.
Refined soya oil has seen a resurgence of the bulls as the Oriental charts indicate a bullish piercing pattern. For the bulls to remain in charge, the price must remain above the Rs 470 levels amidst high volumes and open interest expansion. Market internals indicate a 32% rise in turnover and 5% dip in open interest.
Metals
Aluminium witnessed a pullback after a decline of three weeks. Swing players are likely to initiate longs as long as the price remains above the Rs 68 levels. Lower traded volumes indicate a buy-and-hold approach. Hold existing longs and add small lots at current levels. Market internals indicate a 20% decline in turnover and a 14% increase in open interest.
Copper logged its highest weekly closing since the week ended November 29, 2008. That is a sign of optimism, which was accompanied by higher turnover and open interest attrition. Maintain longs and refrain from big-ticket fresh buys. Market internals indicate a 38% increase in turnover and a 10% decline in open interest.
Gold has seen an "inside" formation as the weekly range was within the level seen the week before last. Should the Rs 13,700 level be violated downwards, expect some profit taking. Fresh buying will kick in above the Rs 14,400 levels if the upthrust is on higher volumes. Market internals indicate a 9% increase in turnover and a 15% decline in open interest.
Nickel consolidated sideways for the third week in a row. The Rs 520 level is a near-term support and the Rs 590-600 band is the immediate resistance. Bulls may await a forceful breakout above the Rs 600 mark before initiating fresh longs in the near term.
Silver is outperforming gold in the short term on a relative comparative basis. The weekly charts show a third consecutive bullish close, which is an indication of fresh buying. The metal is also likely to be a beneficiary of the economic stimulus. Watch the Rs 19,400 level for signs of a reversal. Market internals indicate a 25% increase in turnover and a 20% rise in open interest.
Zinc is showing signs of consolidation too as the weekly chart shows an "inside" formation and a breakout past the Rs 59 level will be needed to confirm a momentum buy. A decline below the Rs 52-mark will trigger weakness. Market internals indicate an 8% increase in turnover and an 11% decline in open interest.
Energy
Certified Emission Reductions (CER) continues to remain under pressure. Unless the Rs 700 hurdle is overcome on the upside with big volumes, desist from fresh long positions.
Crude oil has retraced from the resistance provided by the 13-week SMA. Only a sustained trade above the Rs 2,175 level will see a return of the bulls. The stimulus package may see some sporadic purchases and short covering.
Natural gas has seen a rebound that the Gann swing players will await with excitement. Should the commodity trade above the Rs 234 level amidst higher volumes, expect the short covering to keep the downsides calibrated. A sustained decline below the Rs 222 level will be a short-term sell trigger. Market internals indicate a 111% increase in turnover and a 33% decline in open interest.
Disclosure: The analyst has exposure to gold futures recommended above.
The writer is a Mumbai-based consultant and invites feedback at vijay@BSPLindia.com
