Column

The commodities markets witnessed a continued contraction in turnover as the trader participation slid for the fourth week in a row.

The open interest was lower, too, as the MCX week-on-week open interest was lower by 3%, whereas the turnover shrank by 9%. Potato and natural gas stood out as turnover was higher over the previous week. Open interest gainers over the previous week were copper, crude, nickel and chana.

The unemployment figures released in the US, coupled with the reports of shortages in select agri-commodities, are likely to keep the global markets on the edge in the near term. Traders are advised to cut back on exposure levels.

Agri-commodities
Chana has seen a significant decline in the previous week as the 2700 level gave way rather meekly. The declines may accelerate especially if the prices remain below the 2500 levels. Market internals indicate a 4% increase in open interest which indicates fresh shorts being pressed.

Guar seeds are edging higher in a measured manner and the 1870 level will be a critical short / medium term level to watch out for. The upside potential is up to the 2000-2100 band in the coming weeks if the market is in a conducive mood. Traders having existing long positions may hold on.

Mentha oil is attempting to rally higher and the litmus test will be the 460 level which must be overcome with force if the bulls are to hold on to their initiative. The 420 level is a support that needs to hold if the upmove is to become a reality. Bulls are advised to await a confirmed breakout before initiating fresh longs. Market internals indicate a 71% decline in turnover and a 35% decline in open interest.

Refined soya oil has collapsed along expected lines. The decline is likely to create a scenario of overhead supply as upthrusts will witness unwinding by nervous bulls trapper at higher levels.

Though the short-term charts are appearing to be oversold, the counter is unlikely to offer significant relief in the near term. The 535 threshold will be an interesting level to watch in the coming week/s. Market internals indicate a 18% decline in turnover and a 1% increase in open interest.

Metals
Aluminium has shown signs of consolidation as the weekly charts indicate an “inside” formation. These are indicators of a bigger move in the offing as the counter readies for a directional thrust.

The 112 support if violated will see a faster decline whereas a breakout above the 121 level will rope in fresh buying. Market internals indicate a 13% decline in turnover and a 25% decline in open interest. These are signs of unwinding.

Copper is showing bullishness signs as the 350 level is a threshold for momentum players and the 354 level for the swing trader that will determine the extent of the thrust thereafter. If these levels are overcome with force and commitment from traders, the likelihood of a further rally cannot be ruled out.

Market internals indicate a 7% decline in turnover and a 36% increase in open interest as traders seem to be adopting a buy-and-hold approach on this counter.

Gold is showing signs of some weakness as the counter seems to have a support at the 11200 levels in the near term. Should this threshold be violated with high volumes and increased open interest, expect further declines.

For the bulls to return on this metal, the 11950 - 12000 hurdle needs to be crossed aggressively. Market internals indicate a 6% decline in turnover and a 25% decline in open interest as traders unwound positions.

Nickel is poised delicately at the 1125 level which is a near term support below which the metal may decline to the 1080 - 1050 levels fairly rapidly. The probability of the fall will be gauged from the volumes and open interest on the price move. Alternately, an upmove is likely only above the 1200 levels.

Market internals indicate a 22% decline in turnover and a 7% increase in open interest. These are indications of a fresh short build up

Silver is showing signs of earlier recovery as compared to gold. The weekly chart indicates a bar reversal as the closing is higher than the opening and the 22250 - 22400 band will now act as a support in the near term. Bulls are likely to be in an advantageous position above the 23500 levels. Market internals indicate a 8% decline in turnover and a 10% decline in open interest.

Zinc is yet to test the double bottom at the 86 levels. For momentum players, the 91 level is a critical threshold to watch out for in the coming week. A consistent trade above the 96 level will see bulls return with some conviction provided the volumes and open interest are higher. Market internals indicate a 22% fall in turnover and a 10% dip in open interest. Bulls seem to unwind at higher levels.

Energy

Crude oil has established a base at the 3975 level and unless this is violated, shorts will be risky. Bulls need to wait for a forceful breakout above the 4325 level before committing funds on the long side. Market internals indicate a 13% decline in turnover and a 22% increase in open interest.

Natural gas has indicated a strong bar reversal on the weekly charts as the 408 level will now be a stiff resistance in the near / medium term. The 365 level will be the significant floor for medium term players. Unless the top is overcome, avoid fresh longs. Market internals indicate a 20% increase in turnover and a 21% decline in open interest.

Mandatory disclosure: The analyst has no exposure to any commodity recommended above
vijay@BSPLindia.com