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Await breakout above 345 level before adding long positions in copper

The commodity market behaved along expected lines and the rally in hard assets (metals and energy) continued. Traded volumes perked up 14% on the MCX on a week-on-week basis.

Open interest was lower by 18%. The volume toppers were aluminium, silver, gold, nickel, zinc and refined soya oil. Open interest toppers were crude oil and refined soya oil. The turmoil in the US economy is likely to be responsible for the extension in the rally in hard assets, barring routine profit sales.

Agri-commodities
Chana is in an extended rally and the 2,650 level will now be a support for medium term players. Upsides are likely to meet resistance at the 3,045 level. Market internals indicate 1% decline in open interest as bulls have reduced exposure marginally.

Mentha oil has resumed its downtrend and the 410-415 band is the immediate support. The end of winter is likely to be a negative trigger for the bulls and upside will see resistance at 455 levels. Market internals indicate 40% decline in turnover and 6% decline in open interest.

Refined soya oil is continuing to scale higher levels. Avoid fresh longs as the upmove may falter on profit selling from short term players. Market internals indicate 37% increase in turnover and 19% increase in open interest.

Metals
Aluminium has now established a base at the 116 level and any upmove will encounter resistance at the 127-129 levels, as a medium term congestion band exists at this juncture.

Market internals indicate 26% increase in turnover and 25% decrease in open interest due to the expiry of the February series.

Copper is now perched at the threshold of a resistance at the 344 level. If the resistance is broken, the commodity will see a short squeeze from medium term players. Support, in case of a decline, will emerge at the 325 level. Market internals indicate 7% decline in turnover and 46% decline in open interest. Await a consistent trade above 345 level on higher volumes before adding long positions.

Gold has seen a strong upmove and the 11,850 level is a major support for medium term players. Upside potential in the near term is up to 12,875 levels and the more negative the US economic news, the higher the yellow metal climbs.

Market internals indicate 9% increase in turnover and 4% decline in open interest as some profit sales was seen at higher levels.

Nickel has indicated a breakout, as the 1,165 level is now the major support for short term players. Upside potential in the near/medium term is till the 1,320-1,345 levels. Avoid shorts for now. Market internals indicate 67% increase in turnover and 33% decline in open interest.

Silver is moving up in tandem with gold as US economic data and price of crude oil impact its price.

The 23,200 level will be the immediate support and upsides may scale another 700 points if US economic data is negative. Market internals indicate 54% increase in turnover and 12% decline in open interest.

Zinc has seen a breakout in tandem with other base metals and the 104 level will now be the short term base. Momentum may sag temporarily if this support is broken. The upside potential this week is till the 115-116 levels. Market internals indicate 72% increase in turnover and 37% decline in open interest on expiry of the February series.
Energy

Crude oil is witnessing a bullish phase as the 3,970 resistance has been convincingly overcome. On declines, support will emerge at the 3,820 level. The immediate short term may see some profit sales as the economic data from the US is weak. The impeding Opec meet may also cause some volatility. Market internals indicate 1% decline in turnover and 9% increase in open interest.

Natural gas has seen consolidation as the 344-level support has held. It will continue to be the immediate floor and resistance will be faced at the 384 level. Market internals indicate 2% decline in turnover and 2% decline in open interest on profit sales.

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