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Players are resorting to a trade-and-hold strategy for now

As the excitement over rising crude and bullion prices waned, the markets witnessed a marginal decline in turnover last week as traders avoided enhancing exposure. As long as the current scenario of falling crude oil prices continues, we expect the trader activity to remain subdued. This is because players are resorting to a trade-and-hold strategy for now.

Agri-commodities
Mentha oil is undergoing a routine correction after a stupendous rally. The immediate support will be at the Rs 600-605 band, where an open gap has been witnessed during the upmove. Watch this level for support before venturing into fresh trades. Market internals indicate a 17% decline in turnover and a 15% increase in open interest.

Metals
Aluminium has shown a semblance of support at the Rs 122 levels. If this mark is violated with strength, expect a fresh decline. The lower traded volumes are probably due to withdrawal of retail interest and the July expiry. Market internals indicate a 22% decline in turnover and a 26% decline in open interest.

Avoid fresh longs for now. Copper is now being exchanged at the lower end of the trading range that has been in force since March. It may see a minor support emerging at the Rs 328 levels. A sustained trade below this threshold on high volumes will indicate a fresh decline as the Chinese demand continues to remain slack due to the Olympic Games.

Players who are willing to take very high risks may opt for fresh shorts below the Rs 330 levels if the drawdown is on forceful volumes. Market internals indicate a 2% decline in turnover and a 4% increase in open interest.

Gold is appearing to slide lower as its twin triggers —oil and economy—seem to be showing some semblance of stability for now. The slide may take the yellow metal to the Rs 12,200-12,000 levels in the coming weeks and the impeding shraadhpaksh (during this period the Hindus pay homage to their dead ancestors and is usually a “no buy” month) will also have a bearish pressure on the prices. Upthrusts are likely to meet overhead supply as the trapped bulls liquidate longs. Bullish conviction will return only above the Rs 12,800-12,850 levels. Market internals indicate a 10% decline in turnover and a 20% fall in open interests due to the expiry of the August series.

Nickel is witnessing a support at the Rs 750 levels as the bulls test the waters and bears close shorts. Should this support hold for the next 2-3 weeks and volumes expand on the upthrusts, expect some upmove. Upmoves will witness stiff resistance at the Rs 860 levels where unwinding will be witnessed from the tired bulls. Market internals indicate a 19% rise in turnover and a 7% decline in open interest.

Platinum continues its downward trajectory as the decline in other precious metals is also impacting the white metal. The counter is trading at its lowest since the listing and that makes the upmove, if any, sustainable only above the Rs 25,800-26,000 levels on high volumes. Bottom-fishing must be avoided.

Market internals indicate a 40% fall in turnover as traders abandon this newly-listed commodity and an unchanged open interest.

Silver has slipped lower on considerations similar to gold. The metal will find immediate support at the Rs 22,750-23,000 band in case there’s a fresh round of selling. Sustained upmoves will be seen only above the Rs 25,200 levels, that too on forceful volumes and increased open interests. Market internals indicate a 6% fall in turnover and an 18% drop in open interest. Avoid bottom-fishing.

Zinc is seeing support emerging at Rs 76 with traders buying at this level since the past five weeks. A fall below this threshold will trigger a fresh decline, though limited, as oscillators support a near over-sold scenario. Buying aggressively may be premature now as the Rs 86 threshold needs to be surpassed for an uptrend to emerge. Await a confirmed breakout before buying afresh. Market internals indicate an 11% increase in turnover and a 2% decline in open interest as shorts get covered marginally.

Energy
ATF has witnessed a decline sharper than crude oil as there has been a disconnect between the two commodities. There’s still want of trader participation and the price discovery mechanism is also inefficient as of now. Fresh exposure must be avoided for now. Market internals indicate a 97% decline in turnover and unchanged open interest as the base effect is low.

CER has seen a sharp decline with some delivery-based players selling off in a shallow market. The commodity is now trading at its lowest since listing and fresh longs may be considered above Rs 1,400 levels and only if the upthrust is on high volumes. Market internals indicate a 34% decline in turnover and a 20% fall in open interest.

Crude oil has recovered marginally as the Rs 5,100 level becomes a swing-low for now. As long as it holds, expect bulls to have a fighting chance of a revival. A sustained uptrend can only be seen above Rs 5,520 levels. Market internals indicate a 7% fall in turnover and a 1% drop in open interest. Avoid aggressive buying for now.

Natural gas managed to pull up its sharp declines on the back of bear covering and an upmove in crude oil prices. The Rs 360 level will be a short-term support, where fresh buying and short-covering may be seen. Buying is recommended only on steep declines as the downward threat is reduced to that extent. Market internals indicate a 12% decline in turnover and a 5% fall in open interest.

Mandatory disclosure —Theanalyst has exposure to goldfutures recommended above
vijay@BSPLindia.com