Crude likely to see choppiness; initiate trades on curtailed volumes

The markets witnessed a higher turnover week as the traders participated in the rally in industrials. The week-on-week market-wide turnover on the MCX rose by 60%. The market-wide open interest rose by 1%. 

The US non-strategic petroleum reserves were lower by 2.2 million barrels, at the 351.8 million barrel mark. That cushioned the fall in oil prices and negated the expectation of Libyan supplies softening global crude prices. Due to the expiry of the August month series, there is a fair possibility of the choppiness being above average in the coming days. Traders are advised to initiate trades on curtailed volumes.

Agri commodities
Mentha oil has been witnessing a narrowing range as traders display falling interest on the counter. The falling turnover and open interest fortify that view. Unless the price breakout above the `1,175 levels forcefully, fresh buying is ruled out. Market internals indicate a 4% decrease in turnover and a 2% increase in open interest.

Refined soya oil market internals indicate a 69% decrease in turnover and a 10% increase in open interest.

Metals
Aluminium has gained on a week on week basis but the price has stayed within a range between the Rs106-109 levels. For a buy signal to be triggered, it is important that the bulls take and keep the price above the Rs110 levels with high volumes and open interest expansion.

Till such a breakout occurs, avoid buying. Market internals indicate a 17% decrease in turnover and a 9% increase in open interest.

Copper has logged strong gains as traders showed a long bias on the back of optimism in the US economy. The falling open interest is due to the impeding expiry of the prompt month contracts. For the bullish momentum to sustain, it is critical that the bulls manage to keep the price above the Rs410 levels sustainably. Hold longs for now. Market internals indicate a 23% increase in turnover and a 14% decrease in open interest.

Gold has seen a wild swing in intra week trade as the western bar charts show an outside pattern and the candle charts show a hammer pattern which indicates the possibility of a temporary halt to the upsides. For the upthrust to resume, the bulls need to keep the price above the Rs28,250 levels sustainably with higher open interest. Watch the Rs25,500 levels as a sign of immediate support. Market internals indicate a 78% increase in turnover and a 3% decrease in open interest.

Silver shows a wide fluctuation intra week as the Fed meet on August 27 kept traders on tenterhooks. The near-term outlook is cloudy. Bulls are advised to buy the dips rather than chase upward momentum. Hold existing longs but desist from fresh buys till stability returns. Market internals indicate a 78% increase in turnover and a 1% decrease in open interest.

Zinc has rallied for 3 weeks in a row and established a double bottom at the Rs92 levels. Unless this floor is breached, do not enter shorts in the absolute near term.  Hold existing longs. Market internals indicate a 13% increase in turnover and a 16% decrease in open interest.

Energy
Crude oil shows an inside pattern on the weekly bar charts and a bullish “daki” pattern on the weekly Japanese candle charts. The price staying above the Rs4,025 levels will indicate a rising upward momentum which may test the Rs4,200 levels if follow up buying is seen. Await a clear breakout before initiating longs. Market internals indicate a 1% decrease in turnover and a 10% decrease in open interest.

The writer is the author of A Traders Guide to Indian
Commodity Markets and invites feedback at vijay@BSPLindia.com or 9323720291.
Fair disclosure: The analyst has no exposure to any of the commodities recommended above.