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It was an eventful week for the markets as traded volumes rallied 12% on the Multi Commodity Exchange. However, open interest declined 5% as the expiry in certain commodities witnessed unwinding.

The action was seen in base metals as oversold counters were back in demand and bears ran for cover. Though a sustained trend-reversal could be some time away, traders are likely to find profit opportunities in base metals in the coming fortnight.

The coming week/s will witness higher volatility in the hard-asset class. Traders are advised to play on curtailed volumes and attempt to capitalise confirmed price swings.

Agri-commodities
Mentha oil has seen a bullish piercing pattern on the weekly charts as there was a minor uptick last week against the range seen in the previous weeks. The Rs 605-level will become a swing bottom support and a forceful trade above the Rs 660 level will see a fresh upmove.

Metals
Aluminium has made an attempted rally that has been feeble as the higher levels witnessed profit sales. For a sustainable upmove to occur, the metal should trade above the Rs 123 levels with higher volumes. A sustained trade below the Rs 117 level will be a negative trigger for the bulls.

Copper has established a support at Rs 308, a level that can see fresh longs in case there’s a decline. The Rs 337 level will be a trend determinator as a sustained trade above this level will be required before a sustained upmove occurs. In case of an upthrust, the first area of congestion will be the Rs 345-347 band, where some unwinding can occur.

Any breakout above this threshold will be eventful for the bulls.Gold has seen a bullish piercing pattern similar to mentha oil and the Rs 11,200 level remains a support that the bulls will need to defend vigorously to trigger a rally. A clear breakout above the Rs 12,000 levels will be needed if the bulls are to emerge with an edge. Market internals indicate a 7% increase in turnover and a 17% decline in open interest. The outlook is marginally cautious.

Nickel has seen an upthrust for a fortnight in a row as the extended decline has seen a technical bounce-back after a long hiatus. The Rs 790 level will act as a momentum support below which there can besharper declines. Upsides may see resistance emerging near the Rs 960 level, which is a downward sloping trendline that has been in force since May 2007. Market internals indicate a 61% increase in turnover and a 24% decline in open interest.

Platinum is showing feeble signs of a bottom-formation as the 7-week long decline is witnessing a mild short-covering on declines. In case of an upthrust in the precious metals class, higher risk traders may initiate fresh longs in small lots with a stop loss at the Rs 18,600 level. The long entry should ideally be above the Rs 21,000 level if the volumes perk up.

Trade this counter in minimal lots as the depth and liquidity are poor. Silver has seen a steep decline. In case of a decline below the Rs 18,900 levels with heavier volumes, expect a fresh downtick. Bulls are likely to get a respite only if the metal stays above the Rs 20,250 levels on higher volumes and open interest expansion. Market internals indicate a 3% increase in turnover and a 1% spurt in open interest.

Zinc is appearing to make a temporary bottom and will remain positive as long as the Rs 69 level remains inviolate on the downsides. An upthrust above the Rs 80 level with higher volumes is likely to see a bear squeeze that will witness a fresh momentum-based rally in the absolute near term.

Energy
Aviation turbine fuel (ATF) remains dry as far as traded volumes and open interest expansion are concerned. The Rs 5,950 level will be a near-term support that needs watching as the commodity has seen a fortnight-long support. A forceful decline below this threshold will trigger a fresh downside.

On the flipside, expect an upmove only above the Rs 6,400 level, that too on expanded volumes. Traders may safely avoid this commodity for now.

Certified emission reduction (CER) has seen consolidation after a steep decline three weeks ago. The Rs 1,230 level will be a base support and the Rs 1,485 level will be a resistance that will need to be overcome for the bulls to return.

Crude oil is likely to be the trigger for the global financial market. A decisive breakdown below the$110/barrel may see short-term declines, whereas a consistent trade above the $117-118/barrel will see an upthrust. An upmove must be forceful and on expanded volumes to build buying confidence.

Natural gas has seen the downward pressure easing somewhat as it approaches a support at the Rs 330-332 band that was advocated recently. As long as this support is held and an uptick is witnessed, a flurry of short-covering may trigger a short-term revival on this counter.

The Oriental charts indicate a grave stone doji on the weekly charts — a sign of caution. Buying is recommended only above the Rs 358 levels on high volumes. Market internals indicate a 5% increase in turnover and a 46% increase in open interest.
(Mandatory disclosure -The analyst hasexposure to gold futures recommended above)
vijay@BSPLindia.com