Comment

The markets witnessed a lower-turnover week — MCX logged a 15% decline in turnover on a week-on-week basis. The fall in bullion was the prime reason for trader withdrawal and bulls were on the ropes for funding their longs. Marketwide open interest fell 13% over the previous week as the impeding festive season, expiry of select industrials and profit sales saw unwinding.

The weekly turnover gainers were almond, cardamom, chana, crude oil, natural gas, soybeans, steel (GZB), wheat and zinc. The open interest gainers were gold, lead and zinc.

The coming week is likely to witness extended trader interest in industrials as the signals from the US economy have been more or less optimistic and the broad forecast for 2010 is optimistic in economic terms. Bullion may see some short covering on declines. Traders should lighten up commitments as turnover may contract and implied volatility and impact costs may rise.

Agri commodities
Chana has witnessed an inside formation as the weekly range was inside the previous week’s range. The counter trading below the Rs 2495 levels consistently will be bad news for short-term bulls. Avoid purchases till a valid breakout is seen. Market internals indicate a 175% increase in turnover and a 20% decline in open interest.

Mentha oil has witnessed a bar reversal as the Rs 575 level has now been established and activated as a support in the near term. As long as the counter stays above this threshold, the outlook should remain optimistic. Bulls may hold their positions. Market internals indicate a 20% decline in turnover and a 2% decline in open interest.

Refined soya oil has seen little change week-on-week as the bulls have not been able to offer follow up buying support. For a sustained upthrust, a consistent trade above the Rs 490 levels on a closing basis is required. Till then, buy decisions may be postponed. Market internals indicate a 39% decline in turnover and a 47% decline in open interest as bulls unwound longs.

Metals
Aluminium has witnessed profit sales at higher levels. The white metal has appreciated significantly within its peer group and needs to trade consistently above Rs106 to turn bullish for momentum players. Positional players may remain long for now. Market internals indicate a 6% decline in turnover and a 26% drop in open interest.

Copper has witnessed a minor upthrust as the short-term bullish trendline remains valid. The rising tops and bottoms formation remains in place and the inside formation on the weekly charts indicates a bigger move in the offing. Market internals indicate a 9% decline in turnover and a 13% fall in open interest as bulls unwound longs at higher levels.

Gold has seen continued profit sales as the US dollar firmed up and the risk appetite in the global financial markets expanded. The lower tops and bottoms formations remains in place and the Rs16,600 and then the Rs16,200 level needs to be monitored for signs of buying support on declines. Market internals indicate a 22% fall in turnover and a 8% increase in open interest as the bears enhanced their short exposure.

Nickel has completed a bullish lightning bolt chart formation on the weekly charts and the Rs800 level will be a trend-determination threshold. As long as the counter stays above this, bulls will remain in charge. Hold longs with a stop loss on a closing basis at Rs795 levels. Market internals indicate a 4% decline in turnover and a 5% drop in open interest.

Silver has seen an inside formation as the week’s range was truncated within the previous weekly range and the Rs26,800 low of the recent downmove has held. As long as the bulls are able to defend this threshold, a corrective upmove may be seen on short covering. Await a buy confirmation. Market internals indicate a 30% decline in turnover and a 14% fall in open interest.

Zinc has witnessed a strong relative strength and as long as the bulls are able to keep the closing above the Rs112 level, bulls are likely to retain their initiative. Hold longs for now. Market internals indicate a 23% increase in turnover and a 101% rise in open interest.

Energy
Crude oil has seen a resurgence for several reasons. The Iran-Iraq confrontation, attack on supply lines by Nigerian rebels and the improving economic outlook buoyed prices. The decrease of 3.7 million barrels in the US strategic reserves also helped. The Rs3225-3250 range is likely to be a strong support for momentum bulls and the Rs3535 resistance is likely to be watched for a breakout. Market internals indicate a 5% increase in turnover and a 70% decline in open interest.

Natural gas has recorded a breakout above a congestion level of Rs 252 and as long as it stays above this threshold, the outlook will remain optimistic. The gradual shift in trader interest from crude oil to natural gas continues to gather momentum and is likely to extend for some more time. Remain long. Market internals indicate a 2% increase in turnover and a 11% fall in open interest on profit sales.

(The columnist is CEO BSPLindia.com and author of A Traders Guide to Indian Commodity Markets)
He invites feedback at vijay@BSPLindia.com or
(022) 23438482.
Disclosure: The analyst has exposure to nickel
futures