Column

The markets witnessed a lower turnover week as trader participation was wanting on account of the festive season. The MCX recorded a 28% decline in market-wide turnover and a 9% increase in open interest. That indicates a buy-and-hold strategy on the part of the traders. Turnover gainers were almonds, gasoline, heating oil and nickel.

Open interest gainers were almonds, aluminium, chana, copper, crude oil, gold, lead, mentha oil, silver, soybeans, steel (GZB), wheat and zinc. The trader interest extended on industrial metals along expected lines as hopes of an economic recovery strengthened.

China’s upward revision of its GDP fired optimism as well. Bullion was steady and energy was buoyant. Traders are likely to see lower turnover this week on account of New Year and industrials are likely to gain yet again. Hold long positions for now.

Agri commodities
Chana remains under pressure for the fourth week in a row as the lower tops and bottoms formation continues. The Rs 2,410 area will be a support area to watch. As long as this support holds, bulls may be able to stage an early comeback, though fresh buying is not recommended till the Rs 2,565 hurdle is overcome. Market internals indicate a 66% decline in turnover and a 3% increase in open interest.

Mentha oil is showing signs of establishing and activating a support at the Rs 575 levels. As long as this level holds, expect the bulls to have a fair chance of pushing prices higher. A confirmatory breakout past the Rs 600 levels on higher volumes will be required to trigger a buy. Market internals indicate a 38% decline in turnover and a 3% increase in open interest.

Refined soya oil is witnessing consolidation as the Rs 465 area is likely to prove to be a support in the near term. A sustained trade above Rs 495 will be needed to trigger a fresh buy. Market internals indicate a 30% decline in turnover and a 6% decline in open interest.

Metals
Aluminium is consolidating after a spectacular upthrust in the last one month. The cup-and-handle formation remains in place and the rim will be a support area to watch out for.
If the bulls are able to defend this threshold (Rs 100), the possibility of a fresh upmove is fair. Market internals indicate a 33% decline in turnover and a 7% increase in open interest.

Copper has exhibited a higher tops and bottoms formation in text book style, respecting an 11-month-old bullish trendline in the bargain. That is an indication of bullish times ahead for the bulls, who should continue to hold long positions. Market internals indicate a 24% decline in turnover and a 47% increase in open interest as bulls ramped up exposure.

Gold has closed off its weekly lows, though the week-on-week closing was still lower. The Rs 16,600/ 16,200 supports advocated last week remain in force and need watching. If the precious metal starts trading above the Rs 17,000 levels consistently, a bear squeeze could occur. Market internals indicate a 28% decline in turnover and a 4% increase in open interest as bears have enhanced exposure.

Nickel has witnessed a powerful breakout from a declining formation and that too on higher volumes. The bulls will have to keep the metal above the Rs 840 levels for most of the week to maintain the upward momentum. Hold existing longs for now.

Market internals indicate a 12% increase in turnover and a 15% decline in open interest as the impeding expiry of the December series saw routine unwinding.Silver is witnessing higher relative strength as compared to gold and the Rs 26,600 level will be a support area to watch out for.

A close below this level will be a sell indicator for momentum players, while a breakout above the Rs 27,750 levels on higher volumes will trigger a fresh buy. Market internals indicate a 29% decline in turnover and a 5% increase in open interest as bulls have added positions.

Zinc has managed to record a new weekly closing high for 2009 and that is a sign of optimism. The fact that the bulls have added to longs ahead of an expiry adds to the bullish weight of evidence. Hold existing longs and watch the Rs 107 level for support. Market internals indicate an 11% decline in turnover and a 39% increase in open interest.

Energy
Crude oil has made a higher top and bottom as compared to the previous and week and stayed above the Rs 3,530 levels for most of the time, indicating strength. The US non-strategic commercial inventory declined 4.9 million barrels to 327.50 million barrels, which sparked an upmove.

OPEC held output and that added to the upward impetus. A clear breakout above the Rs 3,800 levels with high volumes and open interest expansion will trigger a medium/ long-term rally. Hold longs for now. Market internals indicate a 43% decline in turnover and a
15% increase in open interest.

Natural gas has witnessed profit sales as the trader switched resources to crude oil. For this counter to gain more ground, the Rs 275 support should hold consistently on a closing basis.

Traders may hold existing longs, though fresh buys are advocated only above the Rs 280 level confirmed breakout. Market internals indicate a 17% decline in turnover and a 15% decline in open interest.

The columnist is the author of A Traders Guide to IndianCommodity Markets
Fair disclosure: The analyst has exposure to nickel futur