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Last week, a large number of triggers boosted trader participation in the markets.
Turnover increased 14% week-on-week on the Multi Commodity Exchange (MCX).
Sentiments turned positive for base metals on expectations of a pullback in the economic outlook, coupled with bear covering.

Bullion witnessed some profit sales as the US dollar displayed relative strength against the currency basket despite negative housing data and banking bailouts.

The turnover gainers were aluminium, CER, copper, crude oil, gold, mentha oil, natural gas, nickel, potato, refined soya, silver and zinc. The open interest gainers were chana, crude oil, mentha oil and refined soya.

This week is likely to be choppy, too, due to an impending re-alignment in currencies. The expiry factor triggered a high degree of bull unwinding. Unless fresh longs are initiated this week, there may be further downsides in the hard-asset class.

Agri-commodities
Chana displayed a falling tops and bottoms formation for the fourth week in a row and a decline to test the Rs 2,175 levels may not be ruled out in the coming weeks. Market internals indicate a 24% increase in open interest — signs of fresh short sales.

Mentha oil witnessed a weak undertone on the back of profit sales and end-of-the-cycle up phase. A decline to the Rs 490 level is not ruled out if the Rs 500 support is violated. Market internals indicate a 42% increase in turnover and an 18% rise in open interest.

Potato has seen a spectacular rally and a consistent trade above the Rs 625 levels will keep the bulls in command. The sharp spurt in volumes indicates a renewed interest in the commodity. Market internals indicate a 143% increase in turnover and an 11% decline in open interest.

Refined soya oil spiked higher with a weak rupee and bear covering, indicating a possible closing of the gap on the weekly charts. A rally to the Rs 460 level is not ruled out if there’s a follow-up buying above the Rs 445 levels. Market internals indicate a 23% rise in turnover and a 16% increase in open interest.

Metals
Aluminium spiked, indicating a bullish pattern that now needs follow-up buying above the Rs 68 mark for the bulls to prevail over the bears. Market internals indicate a 39% increase in turnover and a 54% decline in open interest due to the expiry of the February series.

Copper witnessed a bullish pattern and closed near the upper end of the weekly range. Higher volumes and trader participation indicate optimism. The metal should trade consistently above the Rs 178 mark for the momentum to sustain. Watch the Rs 170 support keenly this week.

Market internals indicate a 12% increase in turnover and a 43% decline in open interest on bull unwinding.

Gold witnessed an inside formation as the weekly chart shows a profit-taking bias near the Rs 16,000 mark. But for the rupee weakness, prices would have slid lower in the domestic market and forced more unwinding.

Watch the Rs 15,000 level this week for signs of support. Buying should be contemplated above the Rs 15,850 levels. Market internals indicate an 8% increase in turnover and a 9% decrease in open interest due to unwinding.

Nickel gained in tandem with its peers and closed above the levels seen in the week before last. Though higher levels attracted unwinding, a follow-up buying can turn the short-term tide, provided the Rs 500 level is overcome on a consistent trade. Market internals indicate a 20%increase in turnover and a 35% decline in open interest.

Silver barely stopped short of a complete reversal on the oriental charts owing to a vicious profit taking. The impeding expiry of the current month series weighed down on the bulls. The Rs 21,250 levels should be monitored closely for signs of support. A decline below this threshold is likely to be a weak indicator. Market internals indicate an 11% increase in turnover and a 31% decline in open interest.

Zinc closed with a bullish fervour. It will need follow-up buying for the bullish momentum to sustain. A consistent trade above the Rs 58 levels, coupled with bear covering, will trigger fresh buying. Market internals indicate a 20% increase in turnover and a 36% decline in open interest.

Energy
Crude oil witnessed a spurt owing to a production cut by members of the Organisation of the Petroleum Exporting Countries Oil (OPEC) and the possibility of fresh cuts in March. A decline in gasoline inventory in the US non-strategic reserves further encouraged bulls.

The Rs 2,320 resistance needs to be overcome in sustained trading for the bulls to get more aggressive. The Rs 2,100 level will be a litmus test for the bulls, below which the rally may fizzle out. Market internals indicate a 41% increase in turnover and a 9% increase in open interest.

Natural gas increased in tandem with crude prices. It should trade above the Rs 215 levels for the outlook to remain positive. The Rs 200 level will determine the trend and a decline below this threshold will see a fresh round of weakness. Market internals indicate a 50% increase in turnover and a 6% decline in open interest.

The author is a Mumbai-based investment consultant. He invites feedback at vijay@BSPLindia.com.
Mandatory disclosure: The analyst has no exposure to any commodities.