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ShareMumbai: The markets witnessed a lower turnover last week along expected lines as the holiday riddled week saw truncated participation.
The MCX witnessed a 25% decline in market-wide turnover on a week-on-week basis, whereas the market-wide open interest fell 8%. The weak employment data emanating from the US economy set the proverbial cat lose among the pigeons. Ripples were felt in all industrial commodities as well as energy counters.
Bullion remained relatively insulated as the decline was marginally lower than industrials. The turnover gainers on a pro-rata basis were crude oil, gold, mentha oil, natural gas, nickel and platinum. The open interest gainers were chana, copper, gasoline, refined soya oil, silver, steel (GZB) and wheat.
This week is likely to witness a lower turnover as compared to the last quarterly average due to the festival season and the decline in values. The flood situation in parts of the country and tsunami in Southeast Asia will see some resurgence in agri prices in the coming weeks. Volatility may rise and all fresh trades must be initiated on curtailed volumes.
Agri commodities
Chana has slid lower after attempting an upthrust. As advocated last week, the Rs 2,425 level remains a hurdle that the bulls are unable to overcome convincingly. Unless this occurs, avoid fresh buys. Mentha oil has seen a mild recovery as the anticipated winter demand has lifted values. The Rs 500 level is a near-term support that is likely to witness fresh buys and resistance at the Rs 530 levels which must be overcome if fresh buys are to get triggered.
Potato has seen a week-on-week recovery as the bulls have been granted relief by a bear squeeze at the lower levels. The weekly chart still indicates an "inside formation" where the weekly range is within the previous week's range. The Rs 1,200 level will be a support to watch out for in the near term.
Refined soya oil has slid lower as the Rs 450 level has proved to be a stiff resistance for the near-term players. With the floods in some parts of the country and reported decline in the overall crop yields, the prices are unlikely to slide significantly lower than the Rs 415 levels in the immediate future. Buying is suggested above the breakout level. Market internals indicate a 41% decline in turnover and a 6% increase in open interest.
Metals
Aluminium has attempted to correct higher after a declining pattern spanning a few weeks. For momentum players, the Rs 82.50 level may be deemed as a support in the near term. The metal is now trending within a downward sloping channel where the Rs 93 level will be the resistance area. Unless this hurdle is cleared with high volumes and open interest expansion, fresh buys are not suggested.
Copper has slid to test its trendline support and a possible decline should not be ruled out in the near term. The economic data coupled with the rising inventory levels are spooking the bulls. The chart pattern indicates a rounding top formation that will see fresh weakness if the counter remains sustain ably below the Rs 285 levels.
Gold has gained on a week-on-week basis as the risk aversion levels have climbed and the US dollar saw nervousness on poor unemployment data. The Rs 15,400 level is now an established and activated support which the bulls have to defend actively if the precious metal is to witness some more upthrust. Fresh buys may be considered above the Rs 15,900-16,000 band. Market internals indicate a 17% decline in turnover and a 10% decline in open interest.
Nickel has witnessed a week-on-week gains as short covering at lower levels arrested the decline. The bulls will need to keep the counter above the Rs 820 levels on a closing basis if the uptrend is to sustain. The immediate resistance is at the Rs 870 level and needs to be watched for signs of a breakout. Market internals indicate a 21% decline in turnover and a 41% decline in open interest.
Silver has seen a near-term support at the Rs 25,750 levels and needs to be watched for buying activity on declines. If the bulls manage to defend this level, the possibility of an upthrust is fair as the festival demand is likely to buoy sentiments in the near term. Zinc has consolidated in a scenario where other base metals have declined.
While that indicates higher relative strength, the breakout is likely to be seen above the Rs 95 levels, provided the upthrust is on high volumes and open interest expansion. Support will be seen at the Rs 86 levels and needs to be watched as bulls need to defend it vigorously if an upthrust is to occur.
Energy
Crude oil is locked in a trading range with support at the Rs 3,150 level and resistance at the Rs 3,550 levels. Unless a breakout/drawdown occurs, traders will have to scalp for small profits. The US commercial non-strategic crude inventories rose by 2.8 million barrels to touch 338.40 million barrels and that has added to the downward pressure on prices.
Natural Gas has witnessed a week-on-week decline as the profit sales at higher levels and weakness in crude prices has flagged sentiments in the near term.
As long as the Rs 210 level holds the bulls stand a fighting chance to lift prices, but a decline below this threshold will erode the optimism significantly.
The writer is CEO, BSPLindia.com and the author of A Traders Guide to Indian Commodity Markets. Disclosure The analyst has no exposure to any commodity futures mentioned above.
