Commodity Markets                   Sep 05, 2010

 
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Aug 28, 2009

Focus on industrial metals
 
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The markets witnessed a higher turnover week as the MCX logged a 4 % increase in market wide turnover over the previous week. The market wide open interest rose 3 % as the trader interest emerged on select base metals. The turnover gainers were Gold, Natural Gas, Nickel, Potato and Silver.  Open interest gainers were Cardamom, Chana, Copper, Crude Palm Oil, Gold, Mentha Oil, Nickel and Silver. The US non strategic Crude Oil inventory saw a 4.1 Mn barrel increase  to the 358.8 Mn barrel mark. That saw a downward pressure on Crude prices. The possible improvement in the US economy on potential Fed support are likely to keep sentiments buoyant in the near term. Focus on industrial metals in the near term.
 
Weekly pivots - MCX
Commodity Close Open Int Resistance Support
         
Aluminium - Sept 97.30 1893 99 92
Copper - Nov 352.75 19448 365 321
Gold - Oct 18897.00 19408 19241 18362
Lead - Sept 98.55 1476 103 88
Nickel - Sept 1003.90 5533 1062 907
Silver - Dec 30435.00 15622 31812 27789
Zinc - Sept 98.75 2256 103 88
         
Crude - Sept 3551.00 36312 3679 3230
Nat Gas - Sept 176.60 23178 203 166
         
Almond - Sept 332.25 45 338 327
Cardamom - Sept 1315.40 1813 1385 1214
Chana - Sept 2190.00 905 2333 2062
CPO - Sept 416.50 2533 427 397
Mentha Oil - Sept 758.60 6828 805 712
Potato - Sept 424.10 1547 472 367
Ref Soy Oil - Sept 492.35 391 506 471

Agri Commodities

 
Chana has seen a sizable pressure on bull unwinding and a bearish engulfing candle on the weekly charts. These are indications of pressure in the near term. Unless the price stays above the 2260 levels, fresh upmoves are likely to be technical bounces only. Market internals indicate a 13 % decline in turnover and a 16 % increase in open interest.

Mentha Oil has witnessed a second consecutive week of declines and the 725 support has been tested. Watch this threshold for signs of support. Should the bulls fail to defend this level, fresh declines may ensue. This level is a short term trend determinator. Market internals indicate a 18 % decline in turnover and a 8 % increase in open interest as fresh shorts were initiated.

Refined Soya Oil  has seen a volatile week with an imperfect "tonbo" doji on the weekly charts. A consistent trade above the 496 levels will be required to trigger the next round of bullishness and the bulls must await that breakout before adding longs. Market internals indicate a 34 % decline in turnover and a 6 % decline in open interest.

 
Metals
 
Aluminium has seen a bounce from the lows and as long as the bulls manage to keep the price above the 96 levels, the possibility of further upsides remains bright. Longs maybe initiated if the price stays above the 96 mark. Market internals indicate a 18 % decline in turnover and a 9 % drop in open interest as the Aug series approached expiry.

Copper has closed at it's highest after week ended April 03 2010 which is a bullish indicator. The bulls have managed a convincing close above a resistance level and follow up buying and expiry based bear covering should take prices higher. The possibility of 364 levels in the coming few weeks is fair. Maintain a long bias. Market internals indicate a 1 % decline in turnover and 10 % increase in open interest as fresh longs were added.

Gold has logged the fourth consecutive week of gains as the safe haven buying continued. While the out performance of Gold versus Silver ended last week as the white metal out raced the yellow one, test of the previous high cannot be totally ruled out in the near term. Market internals indicate a 4 % increase in turnover and a 4 % increase in open interest.

Nickel has seen a smart pullback from lower levels, but still with a negative w-o-w close. The 955 level will be a critical support area to watch out for and as long as the metal stays above this threshold, the outlook remains bullish. A breakout past the 1030 levels will see the medium term trend change for the bullish. Market internals indicate a 2 % increase in turnover and a 26 % increase in open interest.

Silver has logged a new high and the market internals seem to suggest that the upsides are not done yet. The white metal is back to it's winning ways vis-a-vis Gold and the relative out performance is likely to continue in the coming weeks. Bulls may continue to hold strategic longs for now. Market internals indicate a 35 % increase in turnover and a 5 % increase in open interest as fresh longs were added.

Zinc has managed to bounce back from a bullish trendline that has been valid since June this year. That lends weight to the bullish outlook for the near / medium term as the higher tops and bottoms formation remains in place. The 100 level will be a hurdle to watch in the near term and a breakout past this level will be a trigger for short covering and fresh buying. Maintain a long approach. Market internals indicate a 6 % declines and a 12 % decline in open interest as the Aug expiry approached.
 
Energy
 
Crude Oil has witnessed a volatile week as the US inventory rose by 4.1 Mn barrels over the prior week. The close has been higher than that of the previous week but the bulls are likely to encounter overhead supply till the price remains below the 3650 hurdle. Market internals indicate a 6 % decline in turnover and a 24 % decline in open interest.

Natural Gas is making a lower top and bottom formation as the prices declined for the fourth week in a row. The 172 level will be a support area to watch as the level coincides with a low made on week ended April 03 2010. If a bounce back occurs, it could be a short term pullback alone. Await the quality of the pullback signal before taking a fresh view. Market internals indicate a 2 % increase in turnover and a 3 % decline in open interest.

Vijay L Bhambwani
(Ceo - BSPLindia.com)

The author is a Mumbai based investment consultant and invites feedback at vijay@BSPLindia.com or (022) 23438482.


Mandatory disclosure
- the analyst has exposure to Nickel mentioned above.

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