The past week was a tumultuous one for commodities traders as the precious metals nose-dived on profit sales. Additional margins imposed by overseas exchanges also triggered sales.
Like bullion, copper is showing signs of profit selling, writes Vijay Bhambwani
The past week was a tumultuous one for commodities traders as the precious metals nose-dived on profit sales. The additional margins imposed by overseas exchanges also triggered sales. As I had advocated last week, the psychological peaks of 8,000 and 14,000 levels were surpassed on gold and silver respectively. The profit sales were sharp and put the long positions in a quandary. The polarisation of trades is likely to continue around precious metals and crude in the coming week. Extreme caution is advocated and aggressive buying should be avoided at all costs.
Agri commodities
Chana plunged below the Rs 1930-mark as profit sales and unwinding ahead of the expiry of the December contracts saw the supports at Rs 1860 being tested. In the coming week, I expect the commodity to be volatile and short sales will cushion the falls. Upsides, however, will be curtailed. No fresh exposure is advocated on this counter. Mentha oil is likely to be stuck in a groove. Adventurous traders are advised to avoid the temptation to short the counter and take a contrarian call.
Kapas is likely to remain firm as the Rs 351 support mentioned last week is holding out. I expect the upsides to be limited but evident in the coming week. Jeera is appearing rangebound but firm and is likely to break out only after trading above the Rs 6600 levels in the near month. Till then, adopt a wait and watch approach.
Metals
Like precious metals, copper too is showing signs of profit sales at higher levels as news of the Chinese SRB offering deliveries in the auction dampened sentiments. However, the deliveries have been partial and short interest continues to be high. As with last week, the Rs 199 levels remain a support and Rs 209 will be a major resistance above which the commodity must sustain, if a bullishness is to be sustained.
Gold has retraced from its peaks and is likely to witness support at the Rs 7,280 levels where small purchases maybe initiated by the higher risk appetite traders. Silver is likely to witness support at the Rs 12,475 levels in the coming week. As long as these base supports are not violated, I expect to selling pressure to ebb on these counters. It should be remembered that trades must be initiated on lower volumes only as volatility is expected to remain high.
Energy
Crude has also retraced sharply from its perch above the $60 levels and closed convincingly below this level as the much awaited winter demand has failed to show up. Inventory levels have been above expectations and I expect the upsides to be met by profit sales. The Rs 2692 levels will be a critical level to watch for in the coming days as the MCX near month series will see faster unwinding below this level. Only a sustained trade above the Rs 2778 levels with higher volumes and increased open interest will see buying re-emerge. Till then, adopt a wait and watch approach.
The author is a Mumbai- based investment consultant and invites feedback at vijay@BSPLindia.com
Mandatory disclosure: The author has open positions in MCX crude futures
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