Initiate fresh trade on lower exposure, markets may be illiquid till New Year

The markets witnessed a lower turnover week as the festive season and alternating news flow kept trader participation truncated. The MCX saw a 35% decline in market wide turnover and a 7% increase in open interest. Weekly turnover gainers were aluminium, cardamom, chana, mentha oil and potato. Open interest gainers were aluminium, cardamom, copper, crude oil, crude palm oil, gold, mentha, nat gas, potato, silver and zinc.  

Traders are advised to initiate fresh positions on lower exposure as markets are likely to be illiquid till New Year and therefore can turn on a dime. The Chinese rate hike is likely to add to the year-end froth.

Agri commodities
Chana has seen resurgence in trader interest, albeit on a small base. The price must stay above the Rs2,450 levels in the coming week if the bulls are to add on their initiative. Market internals indicate a 194% increase in turnover and an 86% decline in open interest.

Mentha oil has witnessed a pullback rally and will need to stay above Rs1,150 to regain further ground. Existing longs may be held, but fresh buys avoided. Market internals indicate a 1% rise in turnover and a 4% rise in open interest.

Potato has seen a rally, riding on price rise in other vegetables. If the bulls manage to keep the price above Rs675 on higher participation, a sharper upthrust may occur. Market internals indicate a 42% rise in turnover and a 12% rise in open interest.

Refined soya oil has seen a spike as the demand spiked on the counter. That much of the demand was speculative in nature can be gauged from the fact that the open interest fell while turnover rose. The Rs590 level will be a trend determiner of sorts as the bulls will prevail over the bears as long the price stays above this. Hold existing longs. Market internals indicate a 56% dip in turnover and a 17% dip in open interest.

Metals
Aluminium has witnessed a breakout from a bullish triangle on the weekly charts, which is a buy signal for the positional traders. That the upthrust has come accompanied by higher turnover and open interest expansion add to the bullish weight of evidence. As long as the bulls manage to keep the closing prices above the Rs105 levels, the outlook will remain optimistic. Market internals indicate a 42% rise in turnover and a 20% rise in open interest.

Copper continues to make new highs and bulls may continue to hold existing longs but fresh buys maybe avoided early in the week as traders need to gauge how the Chinese rate hikes impact prices. Longs maybe held with a stop loss at Rs418. Market internals indicate a 14% dip in turnover and an 11% increase in open interest.

Gold has seen profit sales with little buying conviction. Any sustained trade below Rs20,100 will see an acceleration in the selling pressure. Avoid bargain hunting on dips. Market internals indicate a 38% fall in turnover and a 10% rise in open interest.

Nickel, one of the early gainers in the base metals pack, has surrendered its recent gains. The short term trend reversal has been deep and swift. As long as the price remains below Rs1,095, the bulls will remain on the ropes. Market internals indicate a 4% dip in turnover and a 30% rise in open interest.

Silver has seen a higher relative strength compared with  gold but the gains have been minuscule. If the price falls and stays below the Rs43,400 levels, the bears may return with daggers drawn. Avoid fresh buys till the Rs45,250 hurdle is overcome forcefully on the upside. Market internals indicate a 48% decline in turnover and a 4% increase in open interest.

Zinc has gained mildly on a week-on-week basis as the follow up buying was tepid.  Bulls will have to overcome the Rs106 hurdle forcefully to take the metal past its resistance and get into a strong bullish groove. Hold existing longs for now, avoid initiating fresh longs till Rs106 is overcome. A decline below Rs100 will prove to be a panful development for the bulls. Market internals indicate a 38% decline in turnover and a 3% increase in open interest.

Energy
Crude oil has rallied on the twin triggers of falling US non strategic reserves and a harsh winter in the western world. The possibility of the Rs4,250 levels being tested in the coming fortnight remains fair and bulls may hold their existing longs. In case of declines, fresh buys maybe contemplated near the Rs3,950 levels. Market internals indicate a 41% decline in turnover and a 43% increase in open interest.

Natural gas remained subdued as the traders focussed
on crude oil as the momentum was stronger on black gold.

A sustained close below the Rs180 levels will see an extended consolidation/ profit sales as the bears lose their grip in the near term. Market internals indicate a 16% decline in turnover and a 1% increase in open interest.

The columnist is author of A Traders Guide to Indian Commodity Markets and invites feedback at vijay@BSPLindia.com or (022) 23438482. Mandatory disclosure: The analyst has no exposure to commodities recommended above.