Column

The markets witnessed a sharp spike in turnover as trader participation returned after the festive season ended. The turnover on the MCX was comparable to the week ended December 19, 2009, which indicates heightened trader participation and not just a small base effect. The fag end of the week saw a profit-taking bias across the industrials as the-short-term players locked in gains. The home sales data and the rising crude prices caused concerns among the players on the inflation front. Bullion remained subdued and energy was the bright spot of the week.

The turnover gainers were almond, aluminium, cardamom, chana, copper, crude oil, crude palm oil, gasoline, gold, heating oil, lead, mentha oil, natural gas, nickel, potato, refined soya oil, silver, wheat and zinc. Open interest gainers were almonds, aluminium, cardamom, chana, crude oil, crude palm oil, lead, mentha oil, natural gas, nickel, potato and refined soya oil.

Agri-commodities
Chana has witnessed the sixth week of declines as the lower tops and bottoms formation continued on the bar charts. The higher turnover indicates a bearish pressure and April is the next cyclical trigger point for purchases. In case declines persist, the Rs 2225 levels maybe tested in the coming weeks. Market internals indicate a 146% increase in turnover and an 18% increase in open interest as the bears pressed fresh shorts.

Mentha oil has seen a strong resurgence on buying interest as the bulls have managed a higher weekly close for the third week in a row. The possibility of some profit sales cannot be ruled out and existing longs maybe held with a stop loss at the Rs 605 levels for now. Market internals indicate a 91% increase in turnover and a 15% increase in open interest.

Refined soya oil has witnessed a bearish pattern as the weekly charts show an outside formation on the bar charts and a bearish engulfing pattern on the candle charts. Unless the Rs 495 hurdle is overcome, fresh longs are not advisable. Market internals indicate a 33% increase in turnover and a 45% increase in open interest as bears opened fresh positions.

Metals
Aluminium has made a gravestone doji on the weekly charts which has bearish implications in the absolute near term. Unless the Rs 109 hurdle is overcome, do not open fresh longs as the profit-taking pressure may persist. Below the Rs 100 mark on a consistent closing basis, the bulls may lose their momentum. Market internals indicate a 124% increase in turnover and a 90% increase in open interest.

Copper too has made a gravestone doji on the charts and has similar bearish implications as Aluminium. Unless the Rs 355 hurdle is overcome, fresh longs need not be opened and Rs 338 support needs watching. A forceful violation of this support indicates a selling pressure. Market internals indicate a 101% increase in turnover and a 2% decline in open interest.

Gold has seen a marginal revival in buying support as the decline completed a 38.2% retracement on the weekly charts. A breakout past the Rs 17,000 levels will be a buy trigger for the momentum players. In case of declines, short-term players must defend the Rs 16,800 levels on a closing basis. Market internals indicate a 75% increase in turnover and a 2% decline in open interest.

Nickel has seen a sharp retracement of its recent gains and the Rs 900 mark is now an established and activated double top. The bulls will need to smash this hurdle if the upthrust is to be sustainable. On declines, the Rs 800 mark will be a litmus test for the bulls and a level to be defended vigorously. Market internals indicate a 31% rise in turnover and a 64% increase in open interest.

Silver has seen a strong upmove as the congestion level of Rs 27,800 has been overcome on high volumes as the white metal outperformed gold by a comfortable margin. This week must see the bulls defend the Rs 27,750 levels on declines, if the short-term momentum is to sustain. The counter has a higher probability of an upmove as compared to gold in the near term. Market internals indicate a 110% increase in turnover and a 20% decline in open interest as bulls booked profits.

Zinc has witnessed a sharp decline as the weekly chart shows a big outside pattern and that has bearish implications in the coming weeks. Unless the Rs 124 level is overcome forcefully, fresh longs must not be contemplated. As long as the counter remains below the 116 levels, the bears will have an upper hand.

Market internals indicate an 88% increase in turnover and a 8% decline in open interest.

Energy
Crude oil needs to trade above the Rs 3,825 levels with rising volumes to rope the bulls back in the ring. In case of declines, the Rs 3,700 level must be supported by buyers or the tempo may break. Existing long positions maybe held for now. Market internals indicate an 82% increase in turnover and a 25% increase in open interest.

Natural gas is trading within a narrow band between Rs 250-280 and a breakout / draw down is required before a fresh directional call can be taken by traders.

Await a signal before initiating fresh positions. Market internals indicate an 84% increase in turnover and a 19% increase in open interest.

The columnist is the author of A Traders Guide to Indian Commodity Markets. Views are personal.

Fair disclosure - The analyst has exposure to Nickel futures.