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ShareThe markets witnessed another week of rising turnover as the MCX logged a 5% increase in volumes on a week-on-week basis. The market-wide open interest rallied 3% as bulls enhanced commitments.
Trader participation continued to rise on industrials as the supply-side constraints coupled with hopes of an economic recovery, boosted sentiments. The volume gainers were aluminium, copper, gasoline, lead, mentha oil, natural gas, nickel, potato, refined soya and silver. The open interest gainers were chana, gold, mentha oil, nickel, refined soya oil and silver.
The US non-strategic crude oil inventories rose by 1.7 million barrels to 349.50 million barrels, which eased the price somewhat after scaling the $72/ barrel mark. The other important event was the US dollar slipping to the 1.44 mark versus the euro before recovering by the weekend.
Watch the US dollar and crude inventory in the coming weeks as commodity prices will take cues from these two factors. The optimism on the base metals is likely to continue but traders must be prepared for high volatility and bouts of profit sales as short-term bulls lock in gains.
Agri-commodities
Chana has closed at it's highest after week ended April 12 2008, which is a bullish indicator. That the volumes were higher adds to the optimism. Should the counter stay above the Rs 2,550 levels consistently, expect a short covering/fresh buying impetus. Market internals indicate a 11% increase in open interest as fresh longs were added.
Mentha oil has gone past itsadvocated support at the Rs 460 levels and closed in the upper end of the weekly range. The closing is at its highest after the week ended June 13, 2009. The higher internals indicate a renewed trader interest on the counter. As long as the counter stays above the Rs 505 levels, the momentum will remain positive. Market internals indicate a 97% increase in turnover and a 43% increase in open interest.
Refined soya oil has closed at its 6-week highs as the soft asset price inflation has caught this commodity too in its wake. Positional traders may take long positions in the mid/far month series as the probability of appreciation to the Rs 490/495 band is good. The Rs 440 level will be a strong support in the coming weeks. Market internals indicate a 12% increase in turnover and a 22 % increase in open interest as bulls initiated fresh longs.
Metals
Aluminium logged its fourth week of gains as the charts indicate a rising tops and bottoms formation amidst high volumes. As long as the base metals mart continues to remain firm, this metal has a above average chance of further upsides in the coming weeks, barring routine bouts of profit sales. The counter may trade in triple digits soon. Market internals indicate a 31 % increase in turnover and a 3 % decline in open interest.
Copper has managed to close at it's highest since Sept 27 2008 and that is along expected lines as I have been advocating a bullish undertone in the industrials since a few weeks. As long as this red metal remains firm, the peers will continue to remain buoyant too, as this metal is the bell weather among the base metals. Market internals indicate a 14 % increase in turnover and a 8 % decline in open interest.
Gold saw a brief period of strength as the precious metal surpassed the Rs 15,000 mark, only to slide lower on the rupee's strength versus the US dollar. Should the dollar fall below the 1.45 mark versus the euro and the energy prices continue to rally, expect gold to witness further upsides. The Rs 14,500 levels are a firm support area for now. Market internals indicate a 19% decline in turnover and a 1% increase in open interest.
Nickel has rallied to close at its highest weekly close after July 12, 2008. That is a sign of optimism as supply-side constraints are keeping the prices firm. As long as copper stays firm, this metal too has a fair chance of remaining bullish. Market internals indicate a 53% increase in turnover and a 7% increase in open interest.
Silver has made a rising bottoms and tops formation that is exhibiting higher relative strength vis-a-vis gold on the weekly charts. The end application of this commodity is not just investing but also industrial and therefore the demand potential is higher on hopes of an economic revival. Should the resistance at Rs 24,000 be overcome on higher volumes and open interest expansion, expect the upthrust to gain momentum. Market internals indicate a 28% increase in turnover and a 31% increase in open interest.
Zinc has closed at its highest after week ended May 24, 2008 and that is a sign of bullishness. Trader participation is high on this counter and impact costs are reasonably low to enable big ticket trades. The prospects are linked to that of aluminium and copper as far as trader sentiments are concerned, and as long as these metals are buoyant, zinc has a fair chance of testing the Rs 95 levels in the coming weeks. Market internals indicate a 1% decline in turnover and a 8% decline in open interest.
Energy
Crude oil has rallied marginally as the US dollar declined vis-a-vis the euro and the Nymex contract surpassed the $72/ barrel mark. The Rs 3,525 level will be a crucial one for this commodity as a breakout past this hurdle with higher volumes and open interest expansion will signal a fresh upthrust. Market internals indicate a 2% decline in turnover and a 2% decline in open interest.
Natural gas is attempting an upthrust but bulls are likely to step in only after the Rs 200 levels are overcome on higher volumes and open interest expansion. The Rs 165 level will be a near-term support for now. Market internals indicate a 29% increase in turnover and a 6% decline 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 trading exposure at the time of writing this piece.
