Column

Markets witnessed a higher volume week as participation levels perked up. The triggers emanating from the global economic scenario cheered commodity players, even as equity markets rallied on similar hopes. The turnover gainers were aluminium, copper, crude oil, gold, mentha oil, natural gas, nickel, potato, refined soya oil, silver and zinc.

Open interest gained in chana, copper, gold, refined soya oil, silver and zinc. Market-wide turnover gained 89% on a week-on-week basis while open interest gained 15%.

The recent gains on energy counters may extend, on gains in the euro and hopes of higher offtake due to the economic recovery. Traders are advised to nurse their longs in the near term.

Agri-commodities
Chana has declined to 5-week lows as trader interest has waned due to cyclical reasons. Immediate support will be seen at the Rs 2,180 levels. This is a significant support, so keep a watch on the levels. Market internals indicate 4% increase in open interest, which indicates a fresh short build up.

Mentha oil too has languished as the seasonal weakness has taken its toll. The Rs 540 level will be a near-term trend determinator and bulls will need to keep the commodity above this threshold. Expect fresh weakness if the Rs 530 level is violated. Market internals indicate 38% increase in turnover and 1% increase in open interest.

Potato has seen an inside formation as the weekly range was within the previous week’s range. This is an indicator of a bigger move in the offing as players consolidate their positions. A decline below the Rs 800 level will see a flurry of sales as longs get liquidated. Market internals indicate 16% increase in turnover and 1% decline in open interest.

Refined soya oil has seen a swing top reversal as the Rs 527 level, which will now act as a resistance above which outlook will turn bullish. Watch the Rs 488 level support keenly in the coming weeks. Market internals indicate 71% increase in turnover and 12% increase in open interest.

Metals
Aluminium remains below the Rs 79 level double-top resistance. To enter the next phase of its bull run, the counter must overcome this threshold. Support is likely to be seen at the Rs 72 level, which is a critical support — if the upthrust is to remain in force, this support must stand. Market internals indicate 89% increase in turnover and 4% increase in open interest.

Copper has failed to overcome the Rs 241 resistance which is also a swing-top reversal. The upthrust will gain momentum once this hurdle is overcome with higher volumes and open interest expansion. The Rs 222 support must stay for the higher bottoms formation to hold. Market internals indicate 305% increase in turnover and 37% increase in open interest.

Gold is still trading within the bearish channel. Keep an eye on the Rs 14,850 level, which is the immediate resistance. Only a breakout above this hurdle on higher volumes and open interest expansion will trigger a fresh round of buying. The Rs 14,200 level will be a crucial short-term support in the near-term. Market internals indicate 66% increase in turnover and 6% increase in open interest.

Nickel witnessed its highest weekly close after the week ended October 4, 2008. The same was accompanied by higher volumes, which is a positive trigger. The saucer-bottoming formation is a bullish indicator for patient players. As long as metal stays above the Rs 600 levels, the outlook is likely to remain positive. Bulls are advised to hold long positions. Market internals indicate 352% increase in turnover and 6% decline in open interest. That indicates some profit sales from short-term bulls.

Silver has scaled 9-week highs and outperformed gold in relative terms. A cup-and-handle formation has been underway, that will confirm after a breakout past the Rs 23,500 levels. Consistent trade above the Rs 23,500 levels will trigger a fresh round of buying in the near-term and force bears to surrender shorts. Declines are likely to see near-term support at the Rs 21,350 levels. Market internals indicate 65% increase in turnover and 82% increase in open interest as fresh longs were initiated.

Zinc witnessed an intra-week high, the highest since the week ended October 4, 2008. The channel-top support at the Rs 72 level will act as a near-term support. It the upthrust is to remain in force, this support must hold. A consistent trade above the Rs 78 levels will trigger a fresh round of bullishness. Market internals indicate 350% increase in turnover and 7% increase in open interest.

Energy
Crude oil has confirmed a breakout past the Rs 2,725 resistance levels, which is a positive indicator. US inventories rose by 0.6 million barrels only, to scale the 375.30 m barrels mark. The anticipated economic recovery and the strength of the euro vis-a-vis the dollar has seen renewed buying interest. Market internals indicate 123% increase in turnover and 1% decline in open interest as some bull positions were liquidated.

Natural gas witnessed a swing reversal from a low point of Rs 165 which will now become the base point for the count back support computations. Expect bullishness as long as the counter remains above the Rs 189 levels. Market internals indicate 142% increase in turnover and a 43% decline in open interest on this counter as bulls liquidated some longs.

Mandatory disclosure: The analyst hasno exposure to the commodities recommended above. The writer is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com