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The markets witnessed a lower turnover week due to the clutch of holidays. The MCX logged a 13% decline in weekly turnover. Market-wide open interest was lower by 6% due to the expiry of crude oil contracts and profit sales on select base metals.

The outlook on bullion turned soft due to the marginal expansion in risk appetite for equities and hopes of a concerted action by the G-20 nations to resolve the worldwide recession through proactive action.

The turnover gainers were certified emission reduction certificates, crude oil, mentha oil, natural gas and platinum. Open interest gainers were aluminium, chana, mentha oil, nickel, potato, silver and zinc.

Agri-commodities
Chana has seen a swing low at the Rs 2,175 levels that bulls must defend. Should prices stay above the Rs 2,300 levels, the bear covering itself will see upticks in the near term. Avoid big ticket longs even in such a scenario, as overhead supply is likely to be sizable. Market internals indicate 41% increase in open interest.

Mentha oil has made a strong comeback as the second season (pre-monsoon) demand kicks in. The upside potential is up to the previous significant high of Rs 619 levels, provided bulls buy in strength. A consistent trade below the Rs 550 levels will see a fresh bout of weakness. Market internals indicate 21% increase in turnover and a 17% increase in open interest.

Refined soya oil has retracted after closing a gap made on the weekly charts between the weeks ended February 14 and 21. In case of declines, a re-test of the Rs 438 level support is a probability. Initiate fresh buying only above the Rs 475 levels; that too if market internals are outright positive.

Metals
Aluminium has seen an upthrust that may test the Rs 71 level. A sustained breakout past this threshold will see a fresh upside if accompanied by higher volumes and open interest addition. All bullish bets are off if the metal trades below the Rs 65 level. Market internals indicate 16% fall in turnover and 7% increase in open interest as players resorted to a buy-and-hold strategy.

Copper has seen profit sales eroding the previous fortnight’s gains as the Rs 195-200 band is proving to be a Great Wall of China for the bulls. Refrain from fresh longs unless this psychological hurdle is overcome with high volumes and big ticket trades.

Conversely, below the Rs 182 levels, the bears may emerge with daggers drawn. Market internals indicate 30% decline in turnover and 7% decline in open interest.
Gold has made a lower bottom for the third week in a row as safe-haven buying seems to have eased, particularly due to stratospheric prices. The yellow metal needs to trade consistently above the Rs 15,575 levels on higher volumes and open interest addition for bulls to regain the initiative. The impending wedding season in this part of the world is expected to cushion the downsides in the absolute near term. Market internals indicate 15% decline in turnover and 3% decline in open interest as bulls unwound longs on advances.

Nickel has fallen in tandem with base-metal peers. A decline below the Rs 460 mark on volumes will be a harbinger of sorrow for the bulls. Hold all existing longs with a stop loss at this threshold on a closing basis. High risk momentum players can consider buying above the Rs 525 levels only. Market internals indicate 36% decline in turnover and 35% increase in open interest.

Silver has reacted in tandem with gold, and a decline below the Rs 21,400 levels will be a sore point for bulls in the absolute near term. Open fresh longs only above the Rs 22,450 levels if markets show significant strength.

Zinc is facing hurdles as the Rs 65 level is acting as a roof by way of a double top formation. Fresh strength will be seen on this counter only after the resistance is overcome with a spike in volumes. Watch the Rs 60 level as a support in the coming weeks. If this floor is violated forcefully, close all longs and prepare to go short. Market internals indicate 27% decline in turnover and 10% increase in open interest.

Energy
CER has seen a revival in fortunes; recession worries seem to have pushed prices to oversold levels. The upthrust is likely to witness profit taking bias at the Rs 825 levels. A sustained upmove will occur only if this level is overcome comfortably with high volumes and fresh additions of longs. Market internals indicate 641% increase in turnover (on a small base) and 61% reduction in open interest. Bulls should wait and watch.

Crude oil has rallied for the third week in a row. The commodity holds promise of a saucer (rounding bottoms) formation. That will only be confirmed if and when the commodity trades above Rs 2,475 levels on a consistent closing basis. The Opec meet is likely to set the tone and tenor in the near term. As long as a downward reaction does not breach the Rs 2,150 levels, bulls stand a chance of a comeback. Market internals indicate 13% increase in turnover and 52% decline in open interest due to the March series expiry.

Natural gas has seen a tug of war between bulls and bears that has resulted in a tie for now. Watch the Rs 215 level — as long as rallies are restricted to this threshold or terminate below this mark, the outlook remains bearish. A fall below the Rs 195 level on high volumes and open interest expansion will signal a fresh round of declines. Market internals indicate 9% increase in turnover and 9% decrease in open interest.

The author is a Mumbai-based investment consultant. He invites feedback at vijay@BSPLindia.com. Mandatory disclosure: The analyst has no exposure to
any commodities.