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ShareInvestors should avoid fresh positions in crude oil, natural gas, zinc and aluminium
The markets witnessed a higher turnover last week as trader participation perked up. A slowdown in the upwards march of energy prices triggered a profit-taking bias in the precious metals and led to a significant spike in the volumes.
The economic data emanating from the US played no mean part in impacting price trends as the first half of the week signalled weak data and the latter half showed diametrically opposite trends. The week-on-week volume gainers were aluminium, zinc, crude, gold, mentha oil and nickel. The open interest toppers on a commensurate basis were aluminium, copper, crude oil, gold, mentha oil and zinc. The overall turnover rose 17% on the Multi-Commodity Exchange (MCX) and open interest also increased 9%.
Agri-commodities
Mentha oil is appearing to prepare for an upthrust as the Rs 487 hurdle may be tested/overcome this week. Much will depend on a co-relation between the traded volumes and open interest on such a move.
The Rs 450 level will be a support to watch out for as a close below this level on high volumes may dampen the bullishness in the near/medium term. Market internals indicate a 83% increase in turnover and a 1% increase in open interest.
Metals
Aluminium has witnessed a profit-taking at the higher levels as the Rs 130 level is proving to be a hurdle on the upsides and bulls are showing resistance on fresh buying on the upthrusts.
Unless the Rs 132 hurdle is overcome convincingly, avoid fresh buys. Declines may test the Rs 122 levels in the near term. Market internals indicate a 24% increase in turnover and a 5% increase in open interest.
Copper is mirroring the weak trend in aluminium as the Rs 354 hurdle specified on the upsides in the recent weeks remains inviolate. Till the bulls overcome this threshold forcefully, upmoves are likely to be temporary. The Rs 330-332 band will be a short-term support to watch out for this week.
Below this band, the bulls are likelyto suffer a disadvantage if the volumes and open interest expand. Market internals indicate a 3% decline in turnover and a 7% increase in open interest.
Gold has moved lower in tandem with the crude oil prices as the Rs 12,200 threshold was violated on a closing basis. That the closing was lower on expanded volumes is a sign of concern as the upsides will now become laboured. The weekly charts indicate a lower tops formation as the Rs 12,999 top in May was significantly lower than the top in March, which was at Rs 13,397.
Market internals indicate a 13%increase in turnover and an 8% increase in open interest, indicating fresh short sales.
Nickel has flared up on expanded volumes, thereby establishing and activating the Rs 916-level as the near-term momentum support area, which the investors should watch out for. The erstwhile Rs 1,120-support will now act as a hurdle on the upsides and the rally is likely to slow down as the prices approach this threshold. Market internals indicate a 16% increase in turnover and a 25% decline in open interest as the bulls cut their exposure on advances.
Silver has suffered a bout of stiff profit-taking in tandem with gold as the energy price comes off its highs. The Rs 22,750-level will be a support area to watch out for and a sustained close below this threshold will see shorts building up aggressively. Market internals indicate a 6% decrease in turnover and a 20% fall in open interest as the bulls wind down longs in anticipation of a drawdown.
Zinc has plumbed new lows as was advocated last week. The outlook on this commodity is weak and the prices are ruling at their lowest since a listing on the MCX. An upmove will meet with overhead supply as trapped bulls, who have bought/averaged their longs on declines, will now exit on any upthrust. Market internals indicate a 17% decline in turnover and a 17% increase in open interest as bears create fresh shorts on the counter.
Energy
Crude oil is at a critical juncture as the Rs 5,955-resistance and the Rs 5,200-support are likely to determine the trend in the near term. The range was an "outside" formation on the weekly Gann chart and will provide guidance towards the short/medium term direction.
The bias is towards profit sales on advances. Aggressive fresh longs must be avoided for now. Market internals indicate a 45% increase in turnover and a 2% rise in open interest. These are indicators of short-term/intra-day trades rather than overnight long positions.
Natural gas has also shown a tendency towards profit sales as the Rs 550/492 range seen a fortnight ago is also a trend-determining combination like the crude oil. Unless the Rs 550-level is overcome on very heavy volumes, fresh buying should not be considered. Market internals indicate a 38% decline in turnover and a 14% drop in open interest as the bulls pare exposure down.
Mandatory disclosure: The analyst has exposure to gold futures.
vijay@BSPLindia.com
