Comment

The markets saw a lower turnover week as the truncated session on Friday impacted volumes. The week-on-week turnover on the MCX declined by 14% and the overall market-wide open interest fell by 4%. The turnover gainers were crude oil and steel GZB whereas the open interest gainers were aluminium, crude oil, gold, mentha oil, natural gas, potato and soybeans. The action was seen shifting to base metals as a pullback rally was seen across non-ferrous counters. The uncertainty in equity markets saw some defensive buying in gold even as agri-commodities witnessed profit sales. Sentiments on agri-counters indicate de-leveraging as players expect aggressive regulatory/government pressure to unwind speculative long positions.

Agri-commodities
Chana has seen an inside formation as the weak buying was insufficient to lift prices significantly. The agri-commodity space is witnessing de-leveraging as profit sales calibrate the upsides. Only a breakout past the Rs 2,250 levels will mark a new upthrust. Market internals indicate a 47% decline in turnover and a 7% dip in open interest.

Mentha oil has seen a bullish piercing pattern on the Japanese candle stick charts as the bulls have attempted to push prices higher. The turnover seems to indicate that the day/momentum-based traders are not participating in the activity and overnight trades have increased. That indicates a high risk appetite on the long side. Only a sustained trade above the Rs 590 levels will be a fresh buy trigger. Market internals show a 31% dip in turnover and a 5% rise in open interest.

Refined soya oil has seen a tight range bound trade as the bulls and bears slugged it out for supremacy. The Rs 466 hurdle will be a level to watch for signs of resistance which must be overcome convincingly if the upthrust is to sustain itself. Any upthrust must be on higher volumes and open interest expansion if the bulls are to regain their initiative. Market internals indicate a 29% decline in turnover and a 26% decline in open interest.

Metals
Aluminium has witnessed an inside formation as the weekly range was within the previous week’s range and the week-on-week close was positive. The lower turnover is indicative of a pullback rally as the buying support is lacking in large numbers. The Rs 90 level will be a short-term floor below which the bears may get bolder. The bulls are likely to gain the initiative above the Rs 98 levels only.Market internals indicate a 26% decline in turnover and a 31% increase in open interest.

Copper has shown a bullish engulfing candle on the weekly Japanese charts, which is a positive indicator. The lower volumes and open interest suggest a pullback rally at best as of now. The Rs 290 level is now a swing low on the weekly charts and must be defended on declines. The bulls must keep the price above the Rs 320 levels if the upward momentum is to sustain. Market internals indicate a 19% decline in turnover and a 16% decline in open interest.

Gold has seen an inside formation as the weekly range was within the previous week’s range. The Rs 16,675 hurdle needs watching as a breakout above this hurdle will indicate a fresh upthrust. The same must be accompanied by high turnover and open interest combination for the upthrust to sustain. Defensive buying may be expected in the coming sessions. Market internals indicate a 15% fall in turnover and a 3% dip in open interest.

Nickel has exhibited a bullish engulfing pattern on the weekly candle charts and that is a sign of optimism. The follow-up buying support above the Rs 865 will be a must if the upthrust is to sustain itself. Below the Rs 810 levels, the bulls are likely to be at a disadvantage. Market internals indicate a 21% decline in turnover and a 17% decline in open interest.

Silver has witnessed a tight rangebound move as the bulls lacked the conviction to buy in large numbers and the bears desisted from fresh shorts. The lower turnover and an open interest indicate a de-leveraging bias as the action was seen shifting to base metals. Watch the Rs 23,600 level as a near-term support. Market internals show a 19% fall in turnover and an 8% dip in open interest.

Zinc has seen a strong resurgence as the base metal has shown the highest relative strength within this space. The bulls will need to maintain prices above the Rs 100 levels with higher volumes and open interest expansion if the upthrust is to sustain. Below the Rs 94 levels, the bears may re-emerge with strength. Market internals indicate a 7% decline in turnover and an 8% decline in open interest.

Energy
Crude oil has witnessed a mild upthrust as the bear covering-cum-fresh buying boosted sentiments marginally. The Rs 3,275-3,600 range is likely to be the threshold that needs to be watched in the near term as the bulls and bears are likely to be engaged in an indecisive battle till a breakout/drawdown occurs. Market internals indicate a 7% increase in turnover and a 14% increase in open interest.

Natural gas has seen a rangebound trade as the weekly range was within 10% of the base level. On lower turnover and an insipid open interest position, a clear trend is lacking in the absolute short term. A sustained trade above the Rs 270 levels will be needed to trigger fresh buying. Market internals indicate a 3% decline in turnover and a 6% increase in open interest.

The columnist is the author of A Traders Guide to Indian Commodity Markets and invites feedback at ijay@BSPLindia.com or (022) 23438482.
Fair disclosure: The analyst has exposure to nickel futures.