Column

The week saw lower turnover as the higher levels saw reduced participation from short-term players. Volume laggards were base and precious metals, energy and select agri-commodities. Market wide open interest was higher by over 1%, as players ramped up positions on aluminium, chana, copper, nickel, zinc and natural gas. This week is likely to witness news-driven sentiments, as the US Fed rate decision will impart direction to the near term sentiments. Should the Fed cut rates, expect a bump up on base metals and a slow down in the attrition in energy prices. Await a confirmed trigger after the Fed meet and then initiate big ticket trades.

Agri-commodities

Chana has seen a decline for the sixth week in a row as the lower tops and bottoms formation remains in force. The counter may test the 2150/2085 levels in coming days as bears get aggressive. The weekly bar chart indicates a violation of a bullish trendline which is bad news for the bulls. Market internals indicate 19% increase in open interest - confirmation of fresh shorts being initiated.

Guar seeds has seen support emerging at the 1600-1625 levels in absolute short term and the 1775 level as the immediate threshold above which it must stay on good volumes if the uptrend is to sustain.

Mentha oil is showing signs of confirming a short term bottom and the 420-422 band will be crucial. As long as these levels hold as support, the outlook remains optimistic. As and when the 455 level is overcome consistently with high volumes, expect a short term upmove to commence. Market internals indicate 34% decline in turnover and 4% increase in open interest.

Refined soya oil has seen a tendency among bulls to book profits at higher levels. The 540-545 swing reversal top will now be the barrier to watch in the near term. Unless this hurdle is overcome, expect resistance at higher levels.

Lower levels may test the 510-515 levels as an immediate support base. Market internals indicate 2% decline in turnover and 10% increase in open interest. This indicates a possibility of a pullback rally in the offing.

Metals

Aluminium has seen a fourth consecutive week of declines as the lower tops and bottoms formation remains in force. The 93.50 level will be critical and if violated, expect more sell-offs. The 100 level will act as a litmus test for the bulls - only above this level with high volumes will a new upmove commence. Much will depend on the Fed interest rate decision in the near term. Market internals indicate 18% decline in turnover and 20% increase in open interest, indicating possibility of fresh shorts.

Copper has seen a mild pullback and the outlook will also hugely depend on the Fed rate cut decision as the off take will depend on industrial health. Watch the 280 level as a resistance zone in the near term. A consistent trade above this level on high volumes is needed to suggest a breakout from a congestion zone. Market internals indicate 1% decline in turnover and 36% increase in open interest. These are indications of fresh short sales.

Gold is indicating a profit taking bias closer to the 10,500 level and unless this hurdle is overcome with force, expect the yellow metal to remain cautious. Should the Fed cut rates, expect the counter to test/violate the 9,700 mark. Market internals indicate 23% decline in turnover and 4% fall in open interest as higher levels attract profit sales.

Nickel has traded predictably as the bulls have been unable to hold their own against the bears in the near term.
Should this commodity stay below the 1,030 levels consistently, expect the outlook to remain under pressure. Market internals indicate 5% increase in turnover and 24% increase in open interest - indicating fresh sales at lower levels.

Silver has seen partial recovery as the hopes of an interest rate cut gain momentum. The 19,700 level will be a near term resistance area and the 18,600 level will be a near term support to watch. Await a breakout/draw down before initiating fresh trades in either direction. Market internals indicate 23% decline in turnover and 23% decline in open
interest.

Zinc has shown a tendency for bottom fishing and the 86 level will now be a near term support. As long as this support holds, expect the possibility of fresh upmoves. Bulls will have a clear buy mandate only after the commodity starts trading above the 108 level with high volumes. Market internals indicate 18% decline in turnover and 15% increase in open interest.

Energy

Crude oil has seen a tendency towards booking profits on fears of a production hike by OPEC. The inventory data from the US also was a cause for profit taking as declines in stock piles were not as sharp as expected. The near term levels to watch out for will be the 3,380 on declines and 3,650 on advances. Only after the resistance is overcome on high volumes will the new upthrust commence. Market internals indicate 2% increase in turnover and 9% decline in open interest as bulls pare exposure.

Natural gas has declined for fifth week in a row as the lower tops and bottoms formation remains in vogue with one inside formation on the weekly charts. The 265-270 band will be the near term support and unless this threshold is violated, chances of a consolidation phase remain fair. Higher levels are likely to run into overhead supply due to profit taking from trapped bulls. Buying is warranted only above the 305-310 band on high volumes. Market internals indicate 6% decline in turnover and 18% increase in open interest.

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