Comment

The markets witnessed a marginal improvement in the traded turnover as the week-on-week turnover on the MCX rose 3%. The outlook and trader participation in the industrial and energy counters improved as price volatility roped in turnover. The week-on-week volume gainers were aluminium, crude oil, gasoline, mentha oil, natural gas, nickel, potato and zinc. Open interest gainers during the week were chana, copper, gold, mentha oil, platinum and zinc.

This week is likely to witness a continued trader interest on industrial and energy counters as there is a stronger perception of an economic rebound in the global markets in the coming months and the markets are discounting this fact ahead of time.

Agri-commodities
Chana has witnessed a bar reversal on the weekly charts as the intra week was a significant high and the closing is off the highs. Unless the weekly high of Rs 2,555 is overcome convincingly, lay off purchases. Market internals indicate a 7% increase in open interest.

Mentha oil has remained weak as the counter stayed below the Rs 500 mark as was advocated last week. The lower tops and bottoms formation remains in place and the probability of the Rs 460-465 band being tested is greater than it was last week. Avoid longs. Market internals indicate a 8% increase in turnover and a 23% increase in open interest as bears initiated fresh shorts.

Potato has violated a support at the Rs 960 level and should it stay below this mark, expect further weakness. Only a rally past the Rs 1,100 levels will trigger a buy. Avoid buying for now. Market internals indicate a 50% increase in turnover and a 9% decline in open interest.

Refined soya oil has respected the support at the Rs 430 level advocated last and attempted to rally higher. Unless violated, this support should be treated as stop loss. Longs maybe initiated after a breakout above the Rs 470 levels is achieved on high volume and open interest expansion. Market internals indicate a 16% decline in turnover and a 59% decline in open interest.

Metals
Aluminium has indicated a breakout by closing above the Rs 80 levels and with a spike in turnover, which makes the probability of a further upside a sizeable one. The declines may witness support at the Rs 76 levels, which should be used as a stop loss by the swing / positional traders. Market internals indicate a 74% increase in turnover and a 2% decline in turnover indicating some profit sales by short-term bulls.

Copper has witnessed a resurgence in tandem with the base metals pack as the higher bottoms and tops formation remains in force and as long as the August contract trades above the Rs 260 mark, the bulls have ample to cheer about. Market internals indicate a 3% decline in turnover and a 36% increase in open interest as buy-and-hold traders initiated fresh longs.

Gold is making attempts to rally, but is impeded by the Rs 14,900/15,000 psychological hurdle. A convincing breakout is required to rope in the bulls at the current juncture. The Rs 14,400 level will be a short-term support this week. Market internals indicate a 16% decline in turnover and a 12% increase in open interest.

Nickel has surged in tandem with other industrial commodities and is likely to witness a feeble resistance at the Rs 795 previous high. Once overcome, this counter can rally faster than other base metals. The Rs 745 level should be treated as a support for now. Market internals indicate a 12% increase in turnover and a 19% decline in open interest.

Silver has established and activated a support at the Rs 21,000 levels and as long as this support holds, further upsides may occur. The buy trigger will be a consistent trade above the Rs 22,500 mark with high volumes and open interest addition. Market internals indicate a 8% decline in turnover and a 19% decline in open interest.

Zinc will be back on the buy radar of the bulls once it trades consistently above the Rs 78 levels on better volumes and open interest rallies. The Rs 73-74 band will now be the effective short-term support, which maybe utilised as a stop loss. Initiate longs if the industrials are positive and the 78 hurdle is overcome forcefully.
This metal may perform in line with copper in the near term. Market internals indicate a 26% increase in turnover and a 19% increase in open interest.

Energy
Crude oil has established and activated a support at the Rs 2,880 levels. Should the US dollar weaken and / or the non-strategic US reserve decline, longs maybe initiated and a stop loss by swing traders maybe maintained at the Rs 2,880 levels.

On the flipside, as long as the counter trades above the Rs 3,160 levels, expect the upward momentum to persist. Market internals indicate a 10% increase in turnover and a 53% decline in open interest as the expiry of the July series saw a routine unwinding.

Natural gas has rebounded from near the Rs 160 level advocated last week. However, the Rs 182 threshold advocated as a breakout trigger remains inviolate and unless this hurdle is overcome convincingly, lay off fresh buys. Market internals indicate a 67% increase in turnover and a 35 % decline in open interest.

The author is a Mumbai-based investment consultant.
Mandatory disclosure:The analyst has exposure to gold.