Energy futures were in the limelight as light sweet crude attempted to test the August 2005 highs and ended within a whisker from there.
The bulls prevailed over the bears last week. Energy futures were in the limelight as light sweet crude attempted to test the August 2005 highs and ended within a whisker from there. Gold made a new top and retraced lower. I had advocated profit-taking at higher levels.
Readers will recall an article in this column in September titled “Crude — a historical perspective”, wherein I had put forward a hypothesis that crude would edge higher around the second half of January 2006. That was based on historical evidence presented with 10 years backdated data. The rally is likely to extend itself in the coming weeks.
Agri commodities: Chana has seen an uneventful rollover of positions as the near-month contracts now trade at Rs 1,800 levels. Only a breakout above the Rs 1,866 levels will see the commodity see bullish activity.
Jeera remains listless and kapas is consolidating after a decent upward run. As long as the Rs 368 levels are not violated on a consistent closing basis, this is a routine correction. Mentha oil is undecided and is hanging fire after the news flow. A sustained close below the Rs 800 mark will see unwinding on this commodity.
Red chilli continues to show signs of upward momentum and so does rubber. Tur will be bullish once the near-month series starts trading above the Rs 1,600 level with higher volumes. Urad has appreciated on a week-on-week basis and long positions may be held for now. Wheat shows a minor slowdown in momentum, but the trend remains positive.
Metals: Copper continues to test the patience of the bulls and bears alike. I have been advocating a breakout/ breakdown beyond the Rs 209 /199 levels, which has been elusive for over five weeks now. Unless that happens, the outlook is sideways.
Gold has shown a bar reversal after crossing Rs 8,150 on the MCX and trades lower. Support at lower levels maybe seen at the Rs 7,924/ 7,860/ 7,790. The trend still remains up and barring profit sales, major bearishness is not likely in the immediate future.
Silver has been relatively quiet as compared to gold and is likely to witness support at the Rs 12,700 levels in the coming week. Buying is adviced on declines on both precious metals for the medium term patient investors / traders.
Energy: Crude has clearly been the focal point of commodity exchanges around the world. The Osama factor has triggered a bull run that was waiting to happen. The chart showed a rally after the double bottom formation in the last quarter of 2005.
The higher tops and bottoms formation is an optimistic sign and the support base is now rising rapidly. The major support is at Rs 2,880 for the coming week and upsides will see the Rs 3,160 - 3,200 level being tested in the coming weeks.
I expect the shorts to get squeezed at higher levels and lead to a faster appreciation in the next 10 weeks. Long positions must be maintained and fresh positions initiated on declines.
(The author is a Mumbai- based investment consultant.)
(Sebi disclosure - The author has exposure to the MCX Crude futures mentioned above.)
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