Mumbai: The markets witnessed an action-packed week as traders participated in the upthrust on base metals with hopes of a revival in demand. This hypothesis stemmed from a possible stimulus to the Chinese economy.
Since base metals and precious metals tend to move in opposite directions in ideal circumstances, bullion was relatively subdued last week.Energy prices hardened on expectations of a tough stance by Organisation of Petroleum Exporting Countries (Opec) in its forthcoming meeting, with a possible production cut not entirely ruled out.
In terms of turnover, the gainers were copper, crude oil, mentha oil, natural gas, nickel, potatoes, refined soya oil and zinc.
The overall market turnover on Multi Commodity Exchange (MCX) was 3.5% higher on a week-on-week basis.Open interest gainers were aluminium, chana, copper, crude oil, gold, natural gas, nickel, potato and zinc.
The overall market wide open interest was higher by almost 5%.
This week is likely to be an eventful one as the tug-of-war between base metals and precious metals for trader attention will enter a decisive phase.
Agri-commodities
Chana still remains in a downward sloping channel, though the weekly close was above opening levels. The current month contract must trade consistently above the Rs 2,310 levels on higher volumes for any cues for the bulls. Till such a trigger is seen, avoid fresh buys. Market internals indicate a 15% increase in open interest.
Mentha oil is attempting an upthrust that will be confirmed only if the price stays above the Rs 555 levels. If this happens, the Rs 570-575 band may be tested and profit-taking may be expected at those levels. Market internals indicate a 4% increase in turnover and a 20% decline in open interest.
Potato has traded lower after scaling the historical resistance level at the Rs 665 mark. This hurdle is likely to be a formidable one and unless the bulls overcome this level on a consistent closing basis, profit sales will be seen in the interim. Market internals indicate a 115% increase in turnover and a 126% rise in open interest.
Refined soya oil has established and activated a double bottom at the Rs 438 levels and rallied to close a three-week-old gap. The uptrend will sustain only if it trades firmly above the Rs 460 level.
Await a confirmed breakout before initiating fresh longs. Market internals indicate a 34% rise in turnover and a 21% fall in open interest.
Metals
Aluminium has seen the upthrust being arrested by profit sales near the recent resistance levels at Rs 71. Unless bulls are able to keep the price above the Rs 71 mark, fresh longs should be avoided. Market internals indicate a 18% decline in turnover and a 30% increase in open interest.
Copper has moved higher for the second week in a row and managed to trade above the Rs 178 threshold. Positional traders may watch this threshold as a strong near-term floor. For momentum players, the Rs 187 level should be stop loss, below which the longs may be pared. Market internals indicate a 48% increase in turnover and a 27% increase in open interest.
Gold has made a "juji-doji" formation on the weekly charts as the open and close are at near identical levels after wide weekly swings.
This indicates a keen tussle between the bulls and the bears in the near term. Clear buying interest may emerge only after the Rs 16,000 hurdle is overcome on higher volumes and open interest expansion. Conversely, below the Rs 15,100 levels, the momentum may turn weak in the near term. Market internals indicate a steady turnover and 2% increase in open interest.
Nickel is consolidating after an upmove and will need to trade above the Rs 525 levels consistently to attract bulls. Longs may be protected by a stop loss at the Rs 480 levels on a closing basis. Market internals indicate a 12% increase in turnover and a 45% rise in open interest.
Silver has support at the Rs 21,500 level and resistance at Rs 23,000 levels. A breakout/breakdown in either direction will determine the near-term outlook. The medium-/long-term outlook remains positive. Much of the sentiment will be influenced by gold and traders may monitor the US dollar and other economic data for signs of the trend. Market internals indicate a 20% decline in turnover and a 14% decline in open interest on bull unwinding.
Zinc has rallied in tandem with copper and lead and is likely to encounter resistance at the Rs 67 level where profit sales may be seen. Momentum players need to watch the Rs 59 level as a near-term support. Market internals indicate a 55% increase in turnover and a 17% increase in open interest.
Energy
Crude oil is attempting a saucer-formation, which will happen if the counter trades above the Rs 2,380 levels consistently and on higher volumes. The expiry this week may witness higher-than-normal volatility and whipsaws. As long as the Rs 2,075 level holds, there is a likelihood of fresh upsides. Market internals indicate a 17% increase in turnover and a 2% rise in open interest.
Natural gas is trending in divergence with crude oil as the commodity heads towards the critical psychological threshold of Rs 200.Should a violation of this level occur, expect the bulls to surrender longs and cause a fresh bout of weakness. On the flipside, the bulls are likely to get a respite only above the Rs 230 levels. Market internals indicate a 52% increase in turnover and a 127% rise in open interest as fresh shorts were initiated.
Mandatory disclosure: The analyst has no exposure to any commodities.
The author is a Mumbai-based investment consultant. He invites feedback at vijay@BSPLindia.com


