Action to continue in base metals, energy

Turnovers dipped in the commodity markets last week due to lack of participation on account of the holiday season. The MCX witnessed a 12% decline in turnover on a week-on-week basis and open interests also slipped 9%. The volume toppers on the MCX were refined soya oil and zinc, which saw a resurgence in trader interest. Traders initiated fresh positions on crude, gold and mentha oil on overseas cues. Hopes also built around the consumer spending data in the US and the weekend witnessed some action on select base metals and energy counters. A similar trend is likely to persist this week also.

Agri-commodities
Chana has seen the lower trendline has being been overcome at the 2220 level. As long as it remains above this threshold, the outlook remains guarded. Fresh buying is recommended only after a consistent trade above the 2275 levels on higher volumes. Market internals indicate a 12% decline in net long positions as bulls unwound at higher levels.

Guarseeds has shown an engulfing pattern on the weekly charts. The bar chart indicates a continued support emerging at the 1500 level and the 1775 resistance remains inviolate. Only a breakout over this hurdle will see a convincing fresh upmove. Bulls may wait for this before initiating a buy.

Mentha oil will see a moving average resistance near the 460 hurdle according to the weekly bar chart. Market internals indicate a 21% decline in turnover and a 3% increase in open interest, indicating a short build up.

Refined soya oil has flared up after the earlier resistance pivot was overcome on high volumes. The 540 Gann reversal point was the litmus test for bulls, which they have overcome, and will now act as a resistance on the upsides.

Metals
Aluminium has seen the 93 level as a near term support. Till the 98-100 band is not breached, the metal will remain subdued and bulls may remain on the back foot. An upthrust, if any, will encounter overhead supply and fresh longs are advocated only for high-risk players.

Copper will see the 250 levels as the immediate floor for momentum players. The upsides, though calibrated, may witness some extension as the near term outlook appears optimistic on the back of the US consumer spending data, which may trigger some short covering. However, the metal, overall, is expected to remain under pressure.

Gold has seen the psychological threshold of 10000 as a near term support and unless this threshold is violated, fresh shorts are to be avoided. The 10600 level will be the near term resistance and only a forceful breakout past the hurdle will fire off a fresh wave of buying support from marginal players.

Avoid big ticket trades.
Silver shows optimism on the charts, though a clear and conclusive buy trigger will be above the 19500 levels. The 18250 threshold will be a near term support and as long as this level holds, expect the outlook to remain positive. Await a breakout/draw down before initiating fresh trades.

Zinc has shown resilience near the 90 level as a pullback attempt has been recorded on the weekly charts for the second time in four weeks. That volumes have spiked, adds to the weight of evidence that the bulls are attempting to overpower the bears.

Energy
Crude oil needs to overcome the 3750 hurdle with high volumes if the bulls are to regain their initiative in the near term. Till then, watch the 3520-3540 band as the immediate support on declines. The outlook appears guarded yet optimistic and shorts should be avoided for now.

Natural gas has bounced off before testing the 270 support and appears to be tailing the crude oil chart. The coming weeks will see resistance emerging at the 310 levels and ample overhead supply will be seen at these levels. Refrain from pressing shorts and stay long for the next few weeks.

Mandatory disclosure - the analyst has no exposure to any commodity mentioned above.

vijay@BSPLindia.com