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The markets witnessed a higher turnover week as traders made up for the lost participation of the previous week. The volume gainers were aluminium, cardamom, copper, crude oil, crude palm oil, gold, lead, mentha oil, natural gas, nickel, potato, refined soya oil, silver, soybeans and steel (GZB). Open interest gainers were almonds, aluminium, cardamom, copper, gold, mentha oil, natural gas, potato, refined soya, silver and steel (GZB).

Action was seen in industrials as bullion traders pressed shorts. Even industrials suffered from profit-taking as was advocated last week, which is a routine phenomenon after big moves. The US non-strategic petroleum reserves were higher by 1.4 million barrels and totalled 343 million barrels. This week will see the process of trend determination extend itself. Traders are advised to exercise caution on fresh exposure.

Agri-commodities
Chana has made an inside formation on the weekly charts and the Rs 2,225 hurdle remains inviolate for the sixth week in a row. Unless this breakout occurs with forceful volumes and open interest expansion, bulls should stay away from opening fresh longs. Market internals indicate a 4% dip in turnover and a 33% fall in open interest.

Mentha oil is showing signs of a rally that may be confirmed once the Rs 635 hurdle is overcome convincingly. Till then cautious bulls may await their turn to buy. Market internals indicate a 182% increase in turnover and a 10% increase in open interest as bulls added to their positions.

Potato has risen for the second consecutive week and the upthrust has been accompanied by higher volumes and open interest expansion. These are signs of optimism for near-term traders. Momentum traders may hold their existing longs with a stop loss at the Rs 615 levels. Market internals indicate a 95% increase in turnover and a 3% increase in open interest.

Refined soya oil, having failed to overcome the Rs 465 levels, has plunged on bull unwinding and bear sales. Should the price remain below the Rs 450 levels consistently, the possibility of another round of declines should not be ruled out. The trend will turn positive only above the Rs 465 levels. Market internals indicate a 73% increase in turnover and a 10% increase in open interest.

Metals
Aluminium has risen marginally on a week on week basis with insipid incremental volumes. As long as the counter stays above the Rs 97 levels, the existing trend remains upwards. If the bulls manage to keep the closing price above the Rs 102 levels this week, momentum players may bet on the long side. Market internals indicate a 3% increase in turnover and a 15% increase in open interest.

Copper has made an inside formation on the weekly charts and a negative close to indicate short-term weakness. If the metal trade below the Rs 332 levels, traders should play on the short side until the bulls manage a close above the Rs 345 levels. Rallies, if any, must be accompanied by high volumes and open interest expansion or should be suspect and attributed to short covering. Market internals indicate a 3% rise in turnover and a 4% rise in open interest.

Gold has failed to trade above the Rs 17,300 hurdle specified last week and has even managed a close below the Rs 16,550 support floor. That confirms the near-term weakness in the counter, which is likely to frustrate bulls as the impeding expiry of the prompt month series will force a liquidation of longs and / or incurring rollover costs.

Avoid fresh longs till bullish weight of evidence is seen on the counter. Market internals indicate a 24% increase in turnover and a 36% increase in open interest as bears pressed shorts.

Nickel has made a bearish piercing pattern on the weekly charts and has completed a short-term corrective phase at the Rs 955 levels. As long as the bulls can defend this floor, the possibility of nickel outperforming other base metals is fairly good. Above the Rs 1,020 levels on a sustained trade basis, the bulls will regain control over the bears. Market internals indicate a 1% increase in turnover and a 4% decline in open interest.

Silver has shown higher relative strength as compared to gold—a fact that I have been pointing out recently. This outperformance is likely to continue in the coming weeks and bulls should be able to defend the Rs 25,400 levels pro-actively to maintain the upward momentum. Should a trade above the Rs 27,250 levels be seen on convincing volumes, expect the bulls to return with strength. Market internals indicate a 20% increase in turnover and a 3% increase in open interest.

Zinc has managed to hold the closing near previous week levels but will need to trade above the Rs 108 to rope in fresh buying impetus. Below the 104 levels, expect the outlook to weaken. Market internals indicate a 1% decline in turnover and a 16% decline in open interest.

Energy
Crude oil has witnessed a rising inventory in the UN non-strategic petroleum reserves and the price is showing a mild decline, week on week. The truncated weekly range indicates a consolidation and the converging price pattern will indicate a breakout only after the Rs 3,825 hurdle is overcome convincingly on high volumes and open interest expansion. Do not nurse short-term long positions below a close of Rs 3,660 levels.

Market internals indicate a 23% increase in turnover and a 4% decline in open interest.

Natural gas continued along its anticipated weak path as the lower tops and bottoms formation remained in place. The Rs 192 level may be watched as a support below which the bulls may have to suffer more attrition as bears press the price line lower. On the flip-side, if the price manages to rise above the Rs 211 levels, don’t stay short. Market internals indicate a 2% increase in turnover and a 14% increase in open interest.

The columnist is the author of A Traders Guide to Indian Commodity Markets and invites feedback at vijay@BSPLindia.com or (022) 23438482.

Mandatory disclosure - the analyst has no exposure to any commodities recommended above.