Last week, commodities witnessed higher turnover as traders displayed increased risk appetite in the industrial segment.
The week-on-week market-wide turnover on the MCX rose 11%. The market-wide open interest rose 24%. The MCX turnover gainers during the week were cardamon, crude, palm oil, gold, natural gas, potato, silver, sugar and zinc. The open interest gainers were cardamon, cotton, copper, crude oil, gold, lead, mentha oil, nickel, silver and zinc. The US non-strategic petroleum reserves were higher by 1.8 million barrels at 347.5 million barrels. Bullion was volatile as the safe-haven buying was tentative and the rupee remained volatile due to the Union Budget anticipations. This week appears to hold some promise of upward mobility in base metals, but fresh trades still need to be on curtailed exposure.
Agri commodities
Mentha oil has pulled up after a brief correction and closed at a new high. Fresh upsides cannot be ruled out. But buying is not advised due to extreme volatility. Factor in a 15% decrease in turnover and a 20% increase in open interest.
Potato has rallied to August 2009 levels and is in line with the broad-based bullishness in the agri-segment. The breach of the `1,000 ceiling indicates that the bulls are likely to push prices higher, even as the open interest declined marginally due to the expiry of the March futures contracts. Buying is recommended for adventurous traders only. Market internals indicate an 8% increase in turnover and a 3% decrease in open interest.
Sugar M Kol revisited lows of September 2011 as the markets grappled with reports of a build-up of stocks. The Rs2,600 level is emerging as a point of tussle between the bulls and the bears. If the Rs2,600 level is not defended by the bulls, a price recovery can take a while in coming. Avoid fresh longs for now. Market internals indicate a 40% increase in turnover and a 7% decrease in open interest.
Metals
Aluminium attempted to rally after a steep decline last week but managed an inside pattern on the weekly bar charts. Candle charts show that the weekly candle indicates a harami formation, indicating indecision in the near term. The metal must trade above Rs112 consistently in order to rally higher this week. Market internals indicate a 36% decrease in turnover and a 9% decrease in open interest.
Copper is resilient as the weekly close is above a bearish channel for the fourth week in a row. The Rs434 threshold is critical for the bulls as they will have to defend the price above this threshold if a higher tops-and-bottoms formation is to ensue this week. Maintain existing longs, if any, for now. The higher open interest indicates a build-up of fresh longs. Market internals indicate a 7% decrease in turnover and a 58% increase in open interest.
Gold witnessed a mini sell-off as safe-haven buying eased off sharply and the intra-week lows tested the lows of the week to January 28, 2012, which underscores the profit-taking bias in the market sentiment.
Should oil prices ease further, the possibility of fresh declines cannot be ruled out as the rising open interest indicates a short build up. The weekly candle chart shows a spinning-top formation and may lead to tight-ranged trade this week.
Market internals indicate a 9% increase in turnover and a 25% increase in open interest.
Nickel fell for the third week in a row as the bulls failed to provide credible support. That the open interest rose with a decline in price indicates a build-up of fresh shorts. A breach of Rs940 on a closing basis can possibly trigger fresh declines, so bargain-hunting is not advisable for now.
Market internals indicate a 24% decrease in turnover and a 2% increase in open interest.
Silver has closed at its lowest weekly close after the week to February 18, 2012 and erased the gains made by the previous weekly bullish candle. The Rs56,250 level is now emerging as a support area to watch out for, which, if violated forcefully, can lead to fresh declines. The rupee factor will play a large part in determining the near-term trends. Avoid aggressive bargain-hunting on declines in the leveraged segment. Market internals indicate a 1% increase in turnover and a 39% increase in open interest.
Zinc has witnessed a bullish inverted hammer on the weekly candle charts which also coincides with an inside formation on the Western bar charts. These are indications of a churn at Rs105 which must be overcome forcefully, if the metal is to witness bullishness in the weeks ahead. Avoid preemptive buying and await a confirmed breakout above Rs105 on expanded volumes and open interest. Market internals indicate a 1% increase in turnover and a 61% increase in open interest.
Energy
Crude oil is witnessing a coiling up of the weekly ranges as the previous fortnight’s range is contained within the weekly range of the week to March 3, 2012, which indicates a possibility of a big move in either direction whenever the price breaks out in upper / lower direction. Till such a breakout occurs on high volumes and open interest expansion, avoid fresh trades. Market internals indicate a 9% decrease in turnover and a 28% increase in open interest.
Natural gas has dipped to multi-year lows and last week’s close is below the January 2012 monthly low, which was a significant decline in price. The overhang of selling is likely to remain and lower levels cannot really be ruled out. Avoid bottom-fishing for now. Market internals indicate a 17% increase in turnover and an 11% decrease in open interest.
The columnist is the author of A Trader’s Guide to Indian Commodity Markets and invites feedback at
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Fair disclosure: The analyst
has exposure to silver
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