Hold longs in gold with Rs 16,580 stop-loss

The markets witnessed a higher turnover week (partly due to the truncated prior week) as trader participation in the agri and energy counters perked up. The rising crude inventory in the US-non strategic reserves finally exerted profit sales on the counter. The turnover gainers were cardamom, chana, crude oil, gold, lead, mentha oil, natural gas, refined soya oil and silver.

The open interest gainers were aluminium, cardamom, chana, crude oil, crude palm oil, mentha oil, natural gas, refined soya oil, silver, wheat and zinc. The market-wide turnover was higher by 15% and the market wide open interest was lower by 3% on a week-on-week basis.

Agri-commodities
Chana has reacted lower on profit sales as follow-up buying was not forthcoming. That the sales were on higher volumes and open interest expansion makes the decline a formidable situation for the bulls. The Rs 2,200 level must be watched for support, failing which the decline may accelerate. Only after the Rs 2,475 hurdle is overcome, will the outlook turn positive again. Market internals indicate a 72% increase in turnover and a 8% increase in open interest.

Mentha oil has continued on its upward trajectory and is likely to remain in bullish territory as long as the Rs 640 level is defended by the bulls. Hold longs for now. Market internals indicate a 4% increase in turnover and a 18% increase in open interest.

Potato has seen decline as the previous week’s low stands
violated and trader participation was limp. The Rs 580 level will be a resistance to watch. Fresh buying is suggested only after a breakout is seen on high volumes and open interest expansion. Market internals indicate a 5% decline in turnover and a 5% decline in open interest.

Refined soya oil is witnessing pressure at higher levels and the Rs 440 levels will be a litmus test for the bulls as this floor must be defended if any reversal is to occur. Fresh buying is ruled out unless the Rs 465 hurdle is overcome. Market internals indicate a 12% increase in turnover and a 19% increase in open interest.

Metals
Aluminium has consolidated after decent run upwards in the prior week. The Rs 106 level will be a hurdle to watch this week. Only a breakout past the Rs 106 mark with convincingly high volumes and open interest expansion will trigger a fresh upmove. On the flipside, the Rs 100 level will be a support to watch out for. Market internals indicate a 6% decline in turnover and a 45% increase in open interest.

Copper has witnessed an inside formation as the weekly range was within the previous week’s range and profit sales were evident at higher levels. The Rs 360 level will be a short-term hurdle for the bulls to overcome, failing which the overhead supply is likely to remain a concern. The Rs 340 area will be a support to watch out for. Market internals indicate a 5% decline in turnover and open interest.

Gold has surged on the back of a weak US dollar and the anticipated marriage season demand in this part of the world. As long as the bulls manage to defend the Rs 16,650 levels, the possibility of Rs 17,100 cannot be ruled out. Hold longs with a stop-loss at the Rs 16,580 levels. Market internals indicate a 20% increase in turnover and a 3% decline in open interest.

Nickel has consolidated after a major outperformance in recent weeks. Last week’s range was within the previous weekly range, indicating an inside formation — precursor to a breakout / draw-down in the coming days. Watch the Rs 1,150 / 1,060 levels for the same. Market internals indicate a 12% decline in turnover and a 13% decline in open interest.

Silver has maintained its upward trajectory and must maintain a close above the Rs 27,200 levels to remain in bull territory. The possibility of Rs 28,400 cannot be ruled out for now. Hold existing longs with a stop loss at the Rs 26,850 levels. Market internals indicate a 27% increase in turnover and a 12% increase in open interest.

Zinc remains under pressure as the Rs 110 overhead resistance zone remains in place, inviolate. The weekly chart indicates an inside formation and the bulls need to defend the Rs 103 levels if a rally is to occur in the near term. The lower turnover is a minor relief as the sell-off has been more of profit sales than panic sales for now. Market internals indicate a 10% decline in turnover and a 8% increase in open interest.

Energy
Crude oil has reacted lower as the US non-strategic inventories rose by 2 million barrels to hit the 356.2 million barrel mark. The annual maintenance of the refining plants has caused a temporary spike in prices, which is encountering profit sales at higher levels. Unless the Rs 3,850 hurdle is overcome forcefully, the outlook will remain subdued. Market internals indicate a 39% increase in turnover and a 1% increase in open interest.

Natural gas has witnessed the return of the bears as the higher levels attracted shorts with almost no bull support. The Rs 172 level needs watching, should a forceful sell-off occur on its violation, expect the bears to push prices lower. Market internals indicate a 68% increase in turnover and a 28% increase in open interest.

The columnist is the 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 any
commodity futures recommended above.