Outlook remains bullish for crude oil, silver; avoid aggressive fresh gold longs for now

The markets witnessed a lower turnover week as trader participation dried up at higher levels. The weekly MCX market-wide turnover fell 18% whereas market-wide open interest rose 3%.

That underscores the tendency to buy-and-hold as against buy-and-sell which was prevalent last week. Turnover gainers were mentha oil and Potato. Open interest gainers were cardamom, chana, crude palm oil, gold, lead, mentha oil, natural gas, nickel, potato, refined soya oil, silver and zinc. Industrial commodities segment was the market outperformer. The US non-strategic petroleum reserve fell by 9.9 million barrels to test the 346 million barrels mark.

Agri commodities
Chana has made a feeble attempt to hold on to its upmove. It is important that the `2,425 level holds and any upthrust must be accompanied by higher volumes and open interest expansion if rallies are to sustain.  Till volumes perk up, avoid fresh longs. Market internals indicate a 64% decline in turnover and a 4% rise in open interest.

Mentha oil has tried to consolidate after falling off a cliff and the Rs1,025 level will be a crucial support to watch. If the bears manage to keep the price below the Rs1,025 level, fresh declines are not ruled out. Only a sustained trade above the Rs1,130 levels will trigger fresh buys. Market internals indicate a 7% rise in turnover and a 1% rise in open interest.

Potato has slid lower as the bulls have been sluggish on the counter. The Rs620 level will need watching below which the decline may accelerate if the unwinding persists. Avoid longs for now. Market internals indicate a 6% increase in turnover and a 6% rise in open interest.

Refined soya oil has witnessed an outside formation with negative implications as the bulls bailed out of long positions ahead of the prompt month expiry. The Rs590 level will be a trend determinator of sorts as the bulls must hold this level if any possibility of price recovery is to be made possible. Market internals indicate a 6% dip in turnover and a 10% rise in open interest.

Metals
Aluminium has seen a truncated week as the weekly bar chart shows an inside formation on the back of limited buying conviction. For a fresh upthrust, it is necessary that the bulls take the price above the Rs108 levels consistently and manage to expand on the open interest. Since the impeding expiry and holiday season will be dampeners to these conditions, go easy on fresh big ticket longs. Market internals indicate a 25% dip in turnover and a 13% dip in open interest.

Copper has rallied to all time highs on the MCX since listing and the bulls have pared exposure as profits were locked in. This is borne by the decline in open interest as well as turnover. The Rs410 level will be a momentum support that the bulls must defend if further gains are to be recorded in the near/medium term. Hold longs for now. Market internals indicate a 23% dip in turnover and a 4% decline in open interest.

Gold has seen a truncated range as the weekly bar chart shows an inside formation. The Rs20,370 level will be a support area to watch and if violated with force, may see fresh downsides. Avoid aggressive fresh longs for now. Market internals indicate a 22% dip in turnover and an 8% rise in open interest.

Nickel has been a star performer and may test higher levels before profit sales cap the upsides. Watch the Rs1,145 level as an immediate hurdle. Hold existing longs for now. Market internals indicate a 4% dip in turnover and a 29% rise in open interest.

Silver has made an inside formation like gold and the white metal continued to post higher relative strength as compared to gold. The Rs42,750 level will be a crucial level to watch below which the price may witness some more declines. As long as the bulls manage to keep the price above the Rs44,875 level, the outlook remains bullish. Market internals indicate a 22% decline in turnover and a 6% increase in open interest.

Zinc has posted 3 weekly bullish bars in a row as the higher tops and bottoms formation gathered momentum. The Rs101 level must be defended in case of declines if the upthrust is to sustain in the near-term. Market internals indicate a 13% decline in turnover and a 17% increase in open interest.

Energy
Crude oil has witnessed a near identical weekly range on the western bar charts but the Jap candle charts indicate a bullish “Tsutsumi” formation on the weekly charts. Coupled with the 9.9 million barrel decline in the US non-strategic petroleum reserves, the outlook remains positive. As long as the Rs4,075 level is overcome sustainably with higher volumes and open interest expansion, the possibility of testing the `4,200-4,250 level remains open. Hold longs. Market internals indicate a 7% dip in turnover and a 48% dip in open interest.

Natural gas has seen a violation of the Rs190 support and the same will be a short-term hurdle on the upsides as violated supports tend to be near-term resistances. Traders have been alternating between crude oil/natural gas and the flavour of the week was crude oil. Gas traders may re-enter longs only above the Rs192 levels, that too if the volumes and open interest expand substantially. Market internals indicate a 7% dip in turnover and a 25% rise 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 expo-sure to commodities recommended above.