Column

The markets witnessed lower turnover last week, due in part to holidays and truncated participation, particularly in the soft commodities segment.

The optimistic economic data from the US markets led to profit-taking bias across base and precious metals. Natural gas futures were the lone strong gainer in the volumes space on a week-on-week basis.

Volumes fell sharply in aluminium, potato, nickel and refined soya oil. Open interest rallied in crude and zinc, where players enhanced commitments. This week will see a cautious outlook on bullion and possibly, a fresh ramp-up in energy prices. Traders are cautioned about adding fresh longs recklessly amid the threat of market volatility.

Agri-commodities
Chana saw a lower tops and bottoms formation for the third week in a row, as profit sales eroded attempts by the bulls to boost prices. The 2,400 level will be a near-term support, but if volumes spike on a breakdown, the commodity may see a deeper decline.

Mentha oil is trading within an “inside pattern” for a fortnight. These are indications of a bigger move. But traders need to exercise caution on a breakout/draw down. The price discovery after a move needs to be backed up by a rise in volumes and open interest. Market internals indicate 33% fall in turnover and 1% fall in open interest.

Refined soya oil witnessed a false rally; the weekly chart shows the attempt was stonewalled by the selling that occurred near the 600-level. This level is now a significant resistance and unless overcome forcefully, the price is unlikely to gain upward momentum.

Metals
Aluminium saw a deceleration in prices and trader interest as turnover plunged. The weekly chart indicates an inside pattern — last week’s range was within the previous week’s range.

For the bulls to re-emerge, the counter must stay above the 124 level on high volumes and open interest. The 116-level will act as a near-term support. Market internals indicate 56% fall in turnover and 7% fall in open interest.

Copper ran into a wall at the 354 level and its subsequent decline has established the congestion as a double top. Unless the commodity moves above this level, traders should avoid fresh longs. Watch the 332-334 support band. A fall below this support on high volumes may see declines accelerate. Market internals indicate 4% decline in turnover and 10% decline in open interest.

Gold has seen a sharp crack, reminiscent of a decline, a mere fortnight ago. The 11,700 level is a support for the momentum players, below which short-term players can attempt fresh shorts.

The 11,450 level is a swing low support, below which medium-term players may prefer to surrender longs. Bullishness in the near term is likely only above the 12,200 levels and that too on high volumes and open interest build-up. Till then, avoid longs. Market internals indicate 18% decline in turnover and an unchanged open interest.

Nickel has not violated the 1,120 support and appears to be consolidating. The 1,225 resistance remains so avoid longs until a forceful breakout.

Silver ended the week with mild gains compared to the yellow metal. The 22,500 level is a support to watch. The 24,000 hurdle remains. Buying is recommended only after the 24,000 hurdle is overcome on a sustained closing basis. Market internals indicate 23% fall in turnover and 7% fall in open interest.

Zinc is trading between 86-97 and is appearing to gyrate — with a negative bias. The 86 bottom may be re-tested if bears exert selling pressure.

The outlook appears weak in tandem with copper, so avoid fresh longs until the market situation can justify a buy. Market internals indicate 15% decline in turnover and 8% increase in open interest.

Energy
Crude oil has lived up to bullish expectations, especially after the 4,500 resistance was overcome on high volumes. The same will now act as momentum players’ support and the trader activity on this counter is likely to remain higher.

Declines may be calibrated by bear covering, as this commodity has given grief to short sellers in recent months. Market internals indicate 9% decline in turnover and 7% increase in open interest.

Natural gas will remain bullish so long as the 410 hurdle is overcome on a closing basis. Note the high volumes as traders throng to this counter. The dissemination of the numbers indicates informed buying, so fresh upsides can not be ruled out. Market internals indicate 48% increase in turnover and 24% decline in open interest.

Mandatory disclosure: The analyst has exposure to gold & silver recommended above.
vijay@BSPLindia.com