Vijay L Bhambwani

The markets witnessed a lower turnover last week as the ban on select agri-commodities impacted volumes.

The volatility in energy prices accelerated as the supply disruption fears coupled with analyst reports of a super spike in prices spooked players. The spike in oil prices saw a surge in bullion as players resorted to a flight-to-safety strategy.

The turnover toppers on the MCX on a week-on-week basis were copper, crude oil, mentha oil and natural gas. The open interest gainers on a week-on-week basis were aluminium, copper, crude oil, silver, natural gas, nickel and mentha oil.

The action is clearly focussed on hard assets (precious metals and non agri commodities like crude oil and natural gas) and is likely to persist this week too.

Agri-commodities

Mentha oil has finally emerged out of the shadows as was advocated a fortnight ago. The range-bound trading was leading towards a directional breakout and that has finally occurred. The bulls need to follow up the buying with support on all declines to force a bear squeeze on the counter. The 460 level will now be a support on declines and as long as it holds, the outlook remains positive. Market internals indicate a 58% increase in turnover and an 18% increase in open interest. Remain long for now.

Metals

Aluminium has seen a marginal improvement in prices and the 116 level will now act as a short-term base for the swing traders. The upsides will witness a resistance from the overhead supplies at the 122 levels.

Till this hurdle is overcome, avoid big ticket buying. Market internals indicate a 48% decline in turnover and a 19% increase in open interest, indicating a buy and hold approach by the bulls for now.

Copper has witnessed a major spike on the downside as the 354 level advocated as a resistance point remained inviolate. The immediate resistance level has now shifted lower to the 351 level.

Any sustained trade below the 334 levels will see accelerated declines especially if the fall is on a consistent closing basis for a few sessions and on high volumes and open interest. Market internals indicate a 4% increase in turnover and a 9% increase in open interest on a week-on-week basis.

Gold has shown resurgence in tandem with energy prices as the global players rush towards safety. The 12000 level is not just a psychological level but a technical inflection point where resistance can emerge in the near term.

For the medium term players, the 12200 mark will continue to be a bigger hurdle that needs to be overcome if the bulls are to stage a serious comeback. Market internals indicate a 6% decline in turnover and a 1% increase in open interest.

Nickel has violated the 1125 threshold and closed below it. Any sustained trade below the 1100 level with higher volumes will indicate a possibility of further declines as the bulls appear to be on the ropes on this counter. The 1180 level will be a stiff resistance in the coming weeks and till this resistance is overcome, do not attempt purchases.

Market internals indicate a 9% decline in turnover and a 31% increase in open interest.

Silver has been displaying higher relative strength as compared to gold and has also edged higher on the back of higher energy costs. The 23450 level will be a critical resistance area to watch for the swing traders as any sustained trade above this threshold will see a bullish sentiment prevailing on the counter.

The 22000 level will be a support in the near term. Market internals indicate a 26% decline in turnover and a 6% increase in open interest.

Zinc is likely to see a support at the 86 levels which needs to be violated with great force and volumes if a new low is to be made on this counter. The previous week has seen a weak attempt by the bulls to ramp up prices but has been an unsuccessful one. The 96 level needs to be overcome with high volumes if the upthrust is to gain momentum. Market internals indicate a 14% decline in turnover and a 9% decline in open interest. Avoid this counter for now.

Energy

Crude oil has broken past the 4800 resistance point and closed convincingly above this hurdle. The traded volumes have spurted too and as long as the commodity trades above the 4965 levels, the outlook is likely to be positive. May 14 will be a critical news-based trigger for this commodity when the US will come out with its crude inventory and traders are advised to trade light on this counter. Market internals indicate an 18% increase in turnover and a 13% increase in open interest.

Natural gas has spiked higher in tandem with crude oil as the 455 hurdle has been overcome even on a closing basis. In case of decline, the 458 level will now be a support where buying maybe seen in the near term.

Market internals indicate a 3 % increase in turnover and a 45 % increase in open interest.

Mandatory disclosure - the analyst has exposure to gold futures. vijay@BSPLindia.com

Source : DNA