Comment

The markets witnessed a higher turnover week as the weakness in industrials provided fodder to momentum players. The weakness in perceived demand and the fears of a double dip in developed economies saw profit sales on most hard assets. The week-on-week turnover gainers were cardamom, chana, copper, crude palm oil, crude oil, gold, nickel, potato, refined soya oil, silver, wheat and zinc. The open interest gainers were aluminium, copper, crude palm oil, nickel, potato, silver, wheat and zinc.

The MCX recorded a 30% increase in market-wide turnover over the previous week and a 4% decline in market-wide open interest as traders preferred to square up positions instead of enhancing overnight exposure. The US non-strategic crude reserves rose 2.30 million barrels to touch the 329 million barrel mark, which deflated energy prices. The fears of a lower demand scenario kept the bulls at bay on energy counters and the outlook is that of caution even this week. Trade on light volumes.

Agri-commodities
Chana has seen a resurgence as the bulls have made a feeble attempt to revive prices. The weekly chart still shows an inside pattern in the making, as the weekly range was within the previous week’s range. The Rs 2,255 level will be a short-term resistance that the bulls need to overcome if a further upmove is to be possible. Market internals indicate a 17% increase in turnover and a 2% decline in open interest.

Mentha oil has seen a sharp decline as the weekly closing is at its lowest after the week ended November 14, 2009. That is a sign of weakness as the bulls have been unable to provide credible buying support on declines. The Rs 575 level will be a hurdle on advances and unless the same is overcome forcefully, no fresh buys should be contemplated. Market internals indicate a 12% decline in turnover and a 35% decline in open interest.

Refined soya oil has seen an outside formation as the weekly range was beyond the previous week’s range. That the traded volumes rose sharply is a positive sign as the bulls have supported the upthrust. For a continued upmove, it is essential that the bulls manage to keep the prices above the Rs 460 levels.

Market internals indicate a 25% increase in turnover and a 3% decline in open interest.

Metals
Aluminium has recorded the third week of losses in a row as the markets saw the bulls bailing out of positions even as bears press sales. The counter is headed towards its short-term support at the Rs90 mark and the same should be watched for signs of buying support. A sustained trade below this threshold will be bad news for the bulls. Market internals indicate a 13% decline in turnover and a 7% increase in open interest.

Copper has marked a steep fall as the base metals pack has been under pressure in the last few weeks. The Rs 280 level will be a rough and ready support in the near term and should the same hold, expect a relief rally triggered a short squeeze. A sustained trade below the Rs 280 mark is likely to see an extension of the decline. Market internals indicate a 29% increase in turnover and a 9% increase in open interest.

Gold has witnessed a wide trading range this week as the bulls and bears slugged it out. The latter half of the week witnessed a pullback as defensive buying emerged at lower levels, as risk appetite contracted sharply in the equities and forex markets. The Rs16,575 hurdle will be a significant one for the bulls as the selling pressure will be higher as this threshold is approached. A breakout past this hurdle may trigger fresh buying. Market internals indicate a 30% increase in turnover and a 13% decline in open interest.

Nickel has immediate support at the Rs 795 levels below which the bears may press further sales in the near term. The Rs 870 level will be the immediate resistance and needs to be overcome forcefully if a fresh upmove is to be triggered. Avoid buying till a breakout occurs. Market internals indicate a 20% increase in turnover and a 22% increase in open interest.

Silver has seen a breakdown in prices as the Rs25,775 support was violated forcefully. This level will now act as a resistance on the upsides and unless it is overcome with very high volumes and open interest expansion, fresh longs should not be initiated.

Market internals indicate a 50% increase in turnover and a 15% increase in open interest as bears pressed fresh shorts.

Zinc has declined for the fourth week in a row as the base metals pack has been under pressure. The Rs 88 level needs to be watched as the immediate support, which if violated forcefully, will be a bearish indicator in the near term. Fresh buys may be contemplated only above the Rs 102 levels. Market internals indicate a 16% increase in turnover and a 30% increase in open interest.

Energy
Crude oil has seen a gravestone doji on the weekly Japanese charts and that has weak implications for the markets. The Rs 3,225 level will be a support to watch in the near term and the Rs 3,800 resistance will be a stiff hurdle for the bulls to overcome. As the price approaches the Rs 3,800 levels, the selling pressure is likely to accelerate. Avoid longs till a sustained trade above the
Rs 3,595 levels is seen. Market internals indicate a 51% increase in turnover and a 28% decline in open interest.

Natural gas has seen an inside formation as the weekly range was within the previous week’s range. The Rs 236 level will be a support in the near term and should this be violated, expect more declines in the short term. Only a sustained trade above the Rs 275 level will trigger a fresh buy. Market internals indicate a 7% decline in turnover and a 16% 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
Fair disclosure — the analyst has no exposure to any commodities recommended above