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Stay long on refined soya oil

MUMBAI: Commodity markets witnessed a surge in turnover as players returned from the festive season and participated in the rally in bullion and energy counters. The upheaval in the US provided ample volatility for momentum/day traders to profit from. The week-on-week volume toppers were potato, nickel, gold, natural gas, aluminium, copper and crude oil. Mentha oil was a prominent loser on the volumes front as trader interest subsided.

In terms of open interest, the week-on-week gainers were chana, potato, refined soya oil, copper and silver. Open interest contracted sharply in aluminium, mentha oil, nickel and zinc. This week is likely to see an extension of the trends, as precious metals and energy witness sustained trader interest. Base metals stand a fair chance of witnessing some pullback buying.

Agri-commodities
Chana has continued to slide as the weekly charts indicate a lower tops and bottoms formation. Traded volumes remain below average in recent weeks and market internals indicate 44% increase in open interest. These are signs of fresh short sales being initiated.

Kapas is showing signs of strength as the commodity now trades above the short/medium term congestion zone. There will be bullish implications for this commodity as long as its price remains above the 470 levels.

Mentha oil has witnessed a bounce back as the weekly chart shows an outside formation. Though this is a positive indicator, market internals indicate 2% decline in turnover and 44% decrease in open interest. That shows unwinding of bull positions on advances and therefore a lack of conviction at higher levels. Avoid fresh buying till commodity remains below 455-460 band.

Refined soya oil is showing signs of a continued rising tops and bottoms formation. The 545 level will prove to be a base in the short/medium term. As long as this level remains inviolate, expect the uptrend to remain. Stay long.

Metals
Aluminium has seen an outside formation as the weekly range has expanded with 41% jump in turnover and 36% drop in open interest. The expiry process may be a major reason for the decline in open interest. The 92 level is now a short term support, and commodity must trade over 100 level if upmove is to sustain. Outlook remains guardedly optimistic, though a clear buy signal remains elusive.

Copper has seen a pullback rally as turnover rose 30% and open interest rallied 13% on a week-on-week basis. As long as commodity remains above 280 levels, the outlook may be optimistic. But big ticket purchases should be avoided for now.
Gold has seen a salutary upmove as negative US economic data coupled with firm crude prices has seen a global run for safety. Now that the 10,600 hurdle has been overcome, it will act as a support on declines and as long as the counter stays above the 11,000 mark, expect 11,500 levels to be a possibility.

Silver has seen a breakout as prices have cleared the 19,500 hurdle effectively. The upside potential remains till the 20,400-20,600 levels in coming weeks and longs may be held for now. Market internals indicate 70% increase in turnover and 9% increase in open interest, which indicate that a sustainable upmove as a fair possibility.

Nickel has posted a pullback rally in tandem with base metal peers and has overcome the 1,075 threshold, above which the metal must trade if the upmove is to sustain. The 1,000 level will be a major support for now and market internals indicate 121% increase in turnover and 28% decrease in open interest, which indicates increased emphasis on short term trading, rather than big ticket position build up.

Zinc has seen a pullback and the 92 level will now be a short term support. Resistance will be at 104/105 levels and needs to be overcome on high volumes if an upmove is to be seen. Await a confirmed upmove before fresh buys.

Energy
Crude oil remains on a bullish trajectory, as the rising tops and bottoms formations remain in force, and the 3,675 level is now de facto short term base support. The 3,900 level needs watching - bulls will have to keep counter above this level if momentum is to remain positive. Market internals indicate 12% increase in turnover and 44% increase in open interest - both signs of bullishness.

Natural gas has managed to stay above the 300 threshold, which must stay inviolate to sustain the upmove. The headroom on the upside is till 318-322 levels. Market internals indicate 76% increase in turnover and 6% decrease in open interest. These are indicating some profit sales at higher levels. Maintain a positive bias for now.

Mandatory disclosure - the analyst has no exposure to any commodity recommended above.
vijay@BSPLindia.com