Column

Markets witnessed a high turnover week as the trader interest returned on industrials, energy and select soft assets. Week-on-week turnover on the MCX rallied 38% and marketwide open interest fell 4%. The decline was partly due to expiry of select series in the hard assets and mild profit sales from short term bulls.

The turnover gainers were aluminium, copper, crude oil, gold, mentha oil, natural gas, nickel, silver and zinc. Open interest gainers were chana, crude oil, natural gas, nickel, potato and zinc. This week will see an extension of the bullishness on the industrials/base metals. The US unemployment report has also added to the air of optimism in the near term. Traders are advised to maintain a long bias on these counters in the near term.

Agri-commodities
Chana made a lower top and bottom formation for the third week as bulls failed to provide convincing support at lower levels. A decline below Rs 2,000 is likely to be a negative trigger. Market internals indicate 12% increase in open interest as fresh shorts were initiated.

Mentha oil stayed under pressure as the lower tops and bottoms formation remains in force. The Rs 490-495 band is the support and Rs 560 is the resistance. Desist from fresh trades until a breakout/ breakdown beyond these levels.

Refined soya oil is stuck in a rut as the Rs 500 hurdle remains. Avoid fresh buying until a breakout. Market internals indicate 25% fall in turnover and 20% fall in open interest as traders lose interest.

Metals
Aluminium saw a surge in prices, accompanied by massive volumes. The immediate hurdle is the Rs 78 level, above which the bulls are likely to return en masse.

Copper showed signs of strength as the consolidation / correction seems to be nearing an end. A consistent trade above the Rs 242 levels on higher turnover and open interest expansion will be a fresh buy trigger.

Gold declined as action is shifting towards the industrials and economic sentiments show optimism. This is curbing safe haven buying and induced some profit sales. Watch the Rs 14,250-14,400 band this week for signs of support. Expect a further decline if the band is violated. Market internals indicate 15% increase in turnover and 18% decline in open interest.

Nickel cleared the Rs 660 hurdle with higher turnover and open interest expansion. These are positive signs and optimism in the peer group is likely to add to the upward bias. Supply side constraints are likely to see the counter witness further upsides before profit sales kick in. Withhold all longs with a stop loss at the Rs 660 levels on a closing basis.

Silver saw profit sales at higher levels in tandem with gold. The Rs 23,000 support has become critical. The Rs 24,500 level will act as resistance. Expect some upsides if the resistance is overcome forcefully. Market internals indicate 82% increase in turnover and 16% decline in open interest.

Zinc saw a marginal rally compared to peers. The counter needs to trade consistently above the Rs 78 levels for bulls to get a clear go-ahead. The Rs 68 mark will be a support and can be used as stop loss on existing longs.

Energy
Crude oil behaved as per expectations after the cup and handle formation was spotted recently on the weekly charts. The follow-up buying has been a cause for cheer and optimism on the economic front is likely to cushion the downsides. The rally occurred despite the strength of the dollar, which is a positive indicator. The Rs 3,150 level will be a momentum support this week. Market internals indicate 26% increase in turnover and 13% increase in open interest as fresh longs were initiated.

Natural gas has seen support build up around the Rs 169 level. Consistent trade above Rs 205 will be needed with higher volumes and open interest expansion to signal a fresh upthrust. Should crude prices rally, there is above-average probability of natural gas moving higher too. Traders may therefore bet on longs rather than shorts.

The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com
Mandatory disclosure - The analyst has no exposure to any commodities recommended above.