Resurgent copper may test Rs 300 level

Commodity markets witnessed a rebound in traded volumes as the turnover on the MCX (week-on-week) was up 40%. Metals were the front runners, as supply concerns saw base metals perking up, whereas economic fears saw bullishness in precious metals.

The volume toppers were aluminium, copper, silver, nickel, zinc, gold and natural gas. Open interest flared up in zinc, nickel, chana, silver, gold and aluminium.

Energy sector saw profit sales on concerns that the US would slip into a recession. This trend is likely to continue and traders are advised to remain long on bullion.

Agri-commodities
Chana has seen a support base forming at the Rs 2,075-2,100 levels and unless this support is violated, avoid fresh shorts.

A breakout past the Rs 2,150 levels with high volumes and increased open interest will confirm the beginning of a fresh upmove. Market internals indicate 36% increase in open interest.

Mentha oil has shown an inside pattern on as last week’s range was inside the earlier week’s range. The 455 hurdle remains and unless the resistance is overcome on a consistent closing basis, avoid initiating longs.

Support will be seen at Rs 415 level, below which a fresh round of selling may be triggered. Market internals indicate 8% increase in turnover and 2% increase in open interest.

Refined soya oil has seen an extended bullishness on robust volumes. The Rs 550 level is now a near term support and will see fresh buying declines till violated. Market internals indicate 13% increase in turnover and 11% decrease in open interest. Hold longs with trailing stop losses.

Metals
Aluminium has seen a feeble upmove attempt that seems to be a pullback rally. A confirmed upthrust will be seen only after the Rs 100 level is overcome on high volumes and increased open interest.

The Rs 94 level has been established as a strong support for now. Market internals indicate a 150% increase in turnover and 12% increase in open interest. There are indications of bottom fishing.

Copper has seen a strong upmove that has overcome the Rs 285 threshold. Should buying momentum extend due to supply concerns and continued shortage in China, the commodity may test the Rs 294-300 band in the coming weeks. Market internals indicate 59% increase in turnover and 3% decline in open interest.

Gold has seen a confirmed breakout above the Rs 11,000 levels and that too on a closing basis. The Rs 10,900-11,000 levels will now be a short term floor and as long as this floor holds, expect the uptrend to remain.

Upsides may test the Rs 11,500-11,600 levels this week and longs may be held. Market internals indicate 32% increase in turnover and 13% increase in open interest. These are signs of fresh longs being initiated.

Silver has seen an upmove and is poised at the threshold of the Rs 21,000 level, where a multiple point resistance inflection exists. Should a forceful and consistent trade above this threshold be seen, expect a new bull run in the commodity.

The outlook appears optimistic and opportunities exist for bulls above the Rs 21,000 levels. Market internals indicate 61% increase in turnover and a 17% increase in open interest.

Nickel has seen a pullback that points towards support at the Rs 1,080 level for the momentum speculator and at the Rs 1,000 for the swing traders. On upsides, the Rs 1,200-1,225 band will be a strong short term resistance. Unless it is overcome on high volumes and increased open interest, avoid fresh longs. Market internals indicate 46% increase in turnover and 33% rise in open interest.

Zinc has seen consolidation that is building up into an ascending triangle. An upmove past the Rs 104 level on high volumes and increased open interest will confirm breakout from this formation. Bulls are advised to buy only after such a confirmation is seen.

Market internals indicate 46% increase in turnover and 37% increase in open interest.

Energy
Crude oil has seen a retracement after fears of a recession in the US gained momentum. Then US being the largest consumer of oil, demand slowdown fears are resulting in profit taking on long positions.

The Rs 3,500 level will be a litmus test for the bulls to defend and as long as this threshold holds, expect the overall upmove to remain.

The Rs 3,900 level will be a critical hurdle in the medium term. Breakout past the level will see a fresh upmove. Market internals indicate 29% increase in turnover and 16% decline in open interest. That indicates a profit-taking bias.

Natural gas is showing signs of strength and the Rs 305 level has been established as support. Resistance will be at the Rs 335 level and a forceful breakout is required to take the commodity into new bullish patterns.

Await a confirmed breakout before buying afresh. Market internals indicate a 33% increase in turnover and 19% decline in open interest. The indications are of profit sales on advances.

Mandatory disclosure - the analyst has no exposure to any commodity recommended above.
vijay@BSPLindia.com