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Crude oil will stay weak till Rs 5,850 resistance is overcome

The MCX witnessed a 21% increase in turnover as players participated in the weekly volatility. Precious & base metals came under the profit-taking hammer as bulls locked in gains. The big event of the week was the decline in energy prices, as the inventories in the US expanded.

Anticipated destruction in demand for fossil fuels saw attrition in bullion and an upthrust in equities. The result was a stronger dollar and weaker base metals. The interwining of the commodity-forex-equities markets was at its peak as the markets played along expected lines. This pattern is likely to percolate down to this week.

Agri-commodities
Mentha oil has witnessed abar reversal, as the weekly close is lower than the weekly opening. Volumes have expanded. Thatthe intra-week high was the highest in 17 months is a measure of the profit-taking bias on upthrusts. Market internals indicate 71% increase in turnover and 9% increase in open interest. These are indicators of fresh shorts. Avoid longs.

Metals
Aluminium has witnessed a bearish engulfing pattern on the oriental charts. Last week saw a complete reversal of gains made in the preceding three weeks and that too on steady volumes. This indicates some more downsides in the near term. Avoid fresh buys. Market internals indicate an unchanged turnover and 32% increase in open interest — indicating a fresh short build-up.

Copper has slumped on the back of the China factor and there is apossibility of the commodity touching the Rs 337-340 levels in the medium term. Watch the Rs 343 level as a near-term support. Violation of this support on very heavy volumes will see further declines. Only a sustained trade above the Rs 356 levels will reverse this weak outlook.

Gold has witnessed a bar reversal, as the weekly close is significantly lower than the weekly opening and the weekly high is also the significant high. Bulls must now overcome the Rs 13,764 hurdle to regain supremacy in the near term. However, the long-term bullishness of the commodity remains intact. Avoid big-ticket speculative longs. Investment buying on declines may be justified.

Nickel has seen a decline in line with other base metals, and a last-mile support may be expected at Rs 825. Below that, the outlook will turn bearish. Postpone longs until the commodity crosses Rs 975, as bulls are likely to return only above those levels.

Platinum saw a sharp decline as bulls aggressively unwound longs. Outlook is weaker than gold in the absolute short term as resources are funnelled in to higher risk alternatives. The precious metal is quoting at its lowest after listing, which, in the near term, is a cause of concern for bulls. Buy only above the Rs 27,750 levels and on high volumes and increased open interest. Market internals indicate 19% increase in turnover and 6% increase in open interest as bears opened shorts. Wait for lower levels before buying.

Silver, like gold, witnessed a bar reversal and volumes also expanded during this crucial week. But the weekly high was way off the all-time high. Market internals indicate 36% increase in turnover and 13% decline in open interest as bulls unwound longs. The Rs 25,000 level will be a critical support for momentum players. Below that, the outlook is likely to turn weak. Avoid aggressive speculative buying for now.

Zinc has fallen with peers in the base metals pack. Further declines will be seen if there is sustained trade below the Rs 76 level. Any strength in the dollar will be detrimental for this counter.

Energy
ATF has slumped in tandem with crude prices and trader interest has waned on this new kid on the block. Outlook will remain under pressure until the counter trades above Rs 7,350. Avoid fresh longs. Market internals indicate 74% decline in turnover and 14% decline in open interest.

CER has seen profit-taking as higher levels saw follow-up buying dry up. Watch the Rs 1,460-1,465 levels keenly, as any trade below this support will see fresh weakness on this counter. Market internals indicate 7% decline in turnover and 9% increase in open interest as fresh shorts were initiated.

Crude oil sawa deep decline and a bearish engulfing (Tsutsumi) pattern. These are bearish signs and the weakness will persist until the Rs 5,850 resistance is overcome. Market internals indicate 7% increase in turnover and 6% decrease in open interest. The fall in open interest can be attributed to the expiry of the July series.

Natural gas has logged a fortnight of losses as bulls unwound longs. There is a possibility of a decline to the Rs 410 levels, so avoid bottom-fishing. Market internals indicate 14% decline in turnover and 40% decline in open interest as traders reduced exposure.

Mandatory disclosure —Theanalyst has exposure to goldfutures recommended above
vijay@BSPLindia.com