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Traders can hold platinum with a stop loss at Rs 20400

The market witnessed a dull week, and the MCX saw a 20% decline in volumes week-on-week. Volume gainers were certified emission reduction, crude oil and natural gas, which saw trader attention as price volatility provided trading opportunities. Market-wide open interest also saw attrition as outstanding contracts declined 14%. Mentha oil and platinum bucked the trend, as some fresh initiation was witnessed on these counters.

This week is likely to witness trader focus on energy contracts as hurricane Gustav is likely to cause short term volatility on these commodities. Precious metals may follow suit, though to a lesser extent.

Agri-commodities
Mentha oil has established and activated a support at Rs 610. Traders can expect profit on long positions as long as the counter trades higher with increased volumes and open interest. The ultimate test of the bulls will be the Rs 650 resistance, which, if surpassed, will trigger a buy for higher risk takers. All bullish bets are off below the Rs 600-605 band. Market internals indicate 18% decline in turnover and 1% increase in open interest as bulls initiate fresh longs.

Metals
Aluminium witnessed consolidation, as the weekly close was near the previous week’s close. The intra-week range shows a minor bias towards a lower top and bottom formation. Expect a fresh upthrust only after sustained trade above Rs 124. Wait for a breakout before buying.

Copper could remain under pressure as long as the August series stays below the Rs 330 level. Only a sustained trade above Rs 337 will see a revival in fortunes. In case of further declines, expect some support at the Rs 322 level.

Gold is likely to track crude prices in the near term. Should the metal trade consistently above the Rs 12000 mark on high volumes, bulls may get a reprieve. Watch the Rs 11700 level as a momentum floor support. Below this, bulls may go on the defensive.

Downsides are likely to be capped (under normal circumstances, devoid of negative news) due to the impeding festive season, ahead of which, commercial players accumulate stocks. Turnover and open interest figures indicate unwinding on advances in the near term.

Nickel is showing signs of consolidation after a recent run upwards. The upthrust will resume only after consistent trade above the Rs 938 level, on high volumes and open interest expansion. The Rs 865 level will be a minor support for short-term swing traders.

Platinum saw a bullish week, but on poor volumes and low open interest. Momentum traders may hold the metal with a stop loss at the Rs 20400 level. Trade above the Rs 22000 level will see a rapid build up in positions, as bears get squeezed. The upmove will hinge on traded volumes — the higher, the better. Market internals indicate 66% decline in turnover and 5% increase in open interest.

Silver witnessed a fortnight of gains. The upthrust may witness overhead supply in the Rs 20850-20925 band, but a breakout past this level, on high volumes, could see some more upside. A consistent trade below the Rs 19800 level will see some short-term weakness. Much of the directional guidance will come from the outlook on crude oil and gold. Market internals indicate 15% decline in turnover and 15% decline in open interest, indications of bulls unwinding on upthrusts.

Zinc will witness a breakout of multiple congestion levels this week. The minor congestion will be at the Rs 81 mark, followed by the Rs 83 level. Watch the Rs 76 support — there could be short-term weakness if the commodity keeps trading below this level.

Energy
ATF has gone into hibernation. Volumes were absent and trader participation was almost nil due to the lack of corporate participation. Market internals indicate 50% drop in turnover and a complete squaring up of existing positions as traders withdrew completely from overnight trades. Avoid.CER witnessed a partial revival in trader interest and closed at a three-week high. Volumes also rose. This bullishness will be seen only above the Rs 1485 level and on high volumes.

Till then, the counter may witness some mild buying from short term players. Traders are advised to wait and watch as this commodity could be a dark horse in the coming months.

Crude oil saw consolidation with the weekly range indicating an inside formation. The immediate price trigger will be hurricane Gustav, which is likely to cause a partial shutdown of refining capacity in the US west coast. A consistent trade below the Rs 5025 level will see pressure build up on the bulls as mark-to-market payouts step up. Sustained trade above the Rs 5285 level on high volumes will see sharper upmoves as bears get squeezed. Market internals indicate 9% increase in turnover and 1% decline in open interest. The impeding expiry of the September contracts may be attributed to the open interest decline, but clearly, bulls prefer to unwind on advances.

Natural gas witnessed a more pronounced spike than crude oil as gas prices saw sharp volatility ahead of hurricane Gustav. As long as the commodity trades above the Rs 372 level, bulls are likely to remain in charge. Below the Rs 338 support, they will be temporarily compromised.

Mandatory disclosure — theanalyst has exposure to gold futures.
vijay@BSPLindia.com