Column

The markets witnessed a change in gears as traders displayed a radical shift in strategy. The focus shifted from buy-and-sell to buy-and-hold. The same is validated by the 12% decline in turnover (week-on-week) on the MCX and 9 % jump in marketwide open interest.

The jump in energy prices had a rub-off on the bullion counters even as the Korean nuke crisis unnerved global investors into safe-haven buying.The US dollar declined vis-a-vis the euro and added to the bullishness on bullion. The week-on-week volume gainers were aluminium, mentha oil, natural gas, nickel and potato. Open interest gainers were aluminium, crude oil, gold, mentha oil, natural gas, refined soya oil and silver.The optimism on energy and bullion is likely to extend this week as the US non-strategic petroleum reserves were lower by 5.4 million barrels to the 363.10 million barrels level. That is likely to cushion the declines.

Agri-commodities:
Chana is showing signs of trend determination as the Rs 2,180 level will be a hurdle on the near term charts. Only after this hurdle is overcome on the upsides with high volumes and open interest expansion, will the bulls have a fighting chance to revive the prices. Market internals indicate a 4% decline in open interest.

Mentha oil has respected its short-term support at the Rs 525 levels and stayed above this floor at least on a closing basis. The Rs 585 or higher levels will see a clear buy for the bulls to initiate fresh longs, till then, wait and watch. Market internals indicate a 36% increase in turnover and a 2% increase in open interest.

Refined soya oil has shown feeble support at the Rs 475-480 band and as long as this support holds, the near-term outlook will be that of buy on declines for the day / swing traders. The outlook will turn outright bullish above the Rs 510 levels if the same is accompanied by high volumes and open interest expansion. Market internals indicate a 1% decline in turnover and a 4% increase in open interest.

Metals
Aluminium has witnessed a bar reversal (doji on the Japanese charts) as the Rs 64 level has seen a resurgence in buying support. The bulls will need to keep the counter above the Rs 68 levels consistently if a sustained upmove is to occur. Go long if there is strength above the Rs 69 mark. Market internals indicate a 37 % rise in turnover and a 39% increase in open interest.

Copper has shown signs of revival that will accelerate as and when the price stays above the Rs 235 levels on a sustained closing basis. Expectations of an economic revival are likely to witness a buying bias on this counter. Market internals indicate a 27% decline in turnover and an 18% decline in open interest as short-term players locked in gains on longs.

Gold has seen a return of the global investors as US / Korea nuke friction, coupled with higher crude prices saw defensive buying. The Rs 14,950 level will be an inflection point as per the Delta trading system as the previous resistance is overcome. As I had advocated last week, the strong rupee has held back the price of gold which would have been significantly higher. Market internals indicate a 8% decline in turnover and a 8 % increase in open interest, indicating fresh buying.

Nickel is poised on the verge of a breakout which will be triggered above the Rs 665 levels, should the same be accompanied by high volumes and open interest expansion. There are fears of a supply shortage as the recessionary fears had obstructed the mining process and thereby cause a price spike. While such a spike may or may not be temporary, traders are likely to get ample trading opportunities on this metal in the coming weeks. Market internals indicate a 18% increase in turnover and a 33% decline in open interest.

Silver has seen a highest weekly close after the week ended August 2, 2008. That is a sign of bullishness as the Rs 23,000 hurdle advocated last week has been overcome convincingly. Hold longs as the dollar displays weakness vis-a-vis the euro. Market internals indicate a 1% dip in turnover and a 60% rise in open interest as bulls ramped up longs.

Zinc has bounced from lower levels, though a sustained recovery in prices will be triggered above the Rs 76 levels only. Volumes and open interest must rally in tandem if the upthrust is to sustain itself. Hold existing longs with a stop loss at the Rs 70 mark. Market internals indicate a 19% decline in turnover and a 21% decline in open interest as the May series expiry impacted the outstanding positions.

Energy
Crude oil has confirmed a cup and handle formation on the weekly charts and the same was on the back of lower US reserves and expectations of a demand surge. The Rs 2,975 level will be a support area for the near term. Traders need to keep in mind that the June / July months signal the onset of the hurricane season in the US west coast, pushing prices higher. Market internals indicate a 18% decline in turnover and a 1% increase in open interest.

Natural gas has witnessed a strong double bottom support at the Rs 166 levels and this level is a stop loss for the bulls for now. A conclusive upmove will occur above the Rs 205 levels on a sustained closing basis only and aggressive fresh buys should be held back for now. While the new gas discoveries by RIL have had a muted impact on international prices, clarity will emerge in the coming days. Market internals indicate a 8% increase in turnover and a 7% increase in open interest.

Mandatory disclosure: The analyst has no exposure to the commodities recommended above The writer is a Mumbai-based investment consultant