Aluminium poised for gains even as market remains uncertain

The markets witnessed a higher turnover week as the traders participated in the volatility in the markets. Profit sales on bullion presented an opportunity for momentum players and the selling in the industrial commodities complex continued.

Agri-commodities witnessed some sporadic buying as the disruption in the monsoon due to the hurricane ‘Laila’ was expected to impact crop output. The US’s non-strategic crude oil inventory rose by 0.2 million barrels to the 362.7 million barrel mark, which was a short-covering trigger for the bears.

Weekly volumes on the MCX registered a 7% increase whereas the market-wide open interest fell 13%. Turnover gainers during the week were cardamom, chana, copper, crude oil, crude palm oil, gold, lead, natural gas, refined soya oil, steel GZB and zinc. The open interest gainers were aluminium, cardamom, copper, natural gas and potato. The outlook for the markets is that of trend determination as the markets are finding their feet after the recent spike in volatility. Traders are advocated to cut back on their exposure on all fresh trades initiated.

Agri-commodities

Chana has witnessed a bounce-back as the counter rallied on higher volumes and tested three-week highs. The commodity must trade above the Rs 2,240 levels to indicate a fresh rally. Market internals indicate a 74% increase in turnover and a 21% decline in open interest.

Mentha oil is testing the Rs 670 level repeatedly and the same is a short-term floor on the charts, which momentum players need to watch. A forceful decline below this floor will invite fresh shorts by bears. Buying is not recommended unless a breakout above the Rs 725 level occurs. Market internals indicate a 29% decline in turnover and a 2% decline in open interest.

Refined soya oil is showing signs of an upthrust as the weekly charts display an outside pattern. The Rs 455 levels will be a near-term hurdle above which the bears maybe forced to cover shorts. The Rs 440 level remains a near-term support and a draw-down below this threshold will invite bears to press shorts. Market internals indicate a 17% increase in turnover and a 47% decline in open interest.

Metals

Aluminium has exhibited a lower ‘tops and bottoms’ formation for five weeks in a row and is attempting to move upwards if the bar reversal on the weekly charts is any indication. Watch the Rs 90 level as a sign of immediate support, below which the outlook may turn weak. As long as the bulls manage to defend this floor, the possibility of an upthrust remains. Market internals indicate a 5% decline in turnover and a 9% increase in open interest.

Copper has attempted an upthrust as the bulls have managed to defend the Rs 293 levels, which was the previous swing low. The same may be taken a short-term floor and all momentum longs maybe protected with a stop-loss at the Rs 312 levels. A sustained trade above the Rs 326 levels will indicate bear covering and a possible fresh buy trigger. Market internals indicate a 28% increase in turnover and a 1% increase in open interest.

Gold has reacted lower as the previous top was not overcome convincingly and unless a breakout above the Rs 18,400 level occurs forcefully, this level should be construed as a double top. Only a breakout will justify a fresh buy and all existing longs may be held with a stop-loss at the Rs 17,700 levels on a closing basis. Market internals indicate a 10% increase in turnover and an 8% decline in open interest.

Nickel is taking support at the Rs 930 level which has been holding for 3 weeks in a row and may be taken as a short-term floor. Fresh buying is advocated only above the Rs 1,025 levels if and when the upthrust occurs on high volumes and open interest expansion. Below the Rs 935 levels, bears may press shorts. Market internals indicate a 1% decline in turnover and a 16% decline in open interest.

Silver has made an inside pattern as the weekly range was within the previous week’s range. The upthrust remains in force as the rising tops and bottoms formation has not been violated and the white metal exhibits higher relative strength as compared to gold. The Rs 27,800 level will be an immediate support that needs to be watched for now. Market internals indicate a 1% decline in turnover and a 27% decline in open interest.

Zinc is making a lower tops and bottom formation, which is in divergence with its base metal peers, which are attempting a pullback rally. The erstwhile violated support at the Rs 92 mark will be a resistance on the upsides as bulls struggle to push prices higher. Unless this breakout occurs, desist from fresh buys. Market internals indicate a 4% increase in turnover and a 5% decline in open interest.

Energy

Crude oil has rallied from the weekly lows as US crude inventories rose slower than anticipated. The strength in the dollar curbed the upthrust, but for which the rally would have been stronger. Market internals indicate a 1% increase in turnover and a 36% decline in open interest as short-term players unwound longs.

Natural gas is showing signs of divergence with crude oil as the price exhibits profit sales on advances. The Rs 202 level must be overcome on higher volumes and open interest expansion if the upthrust is to occur. Till then, avoid fresh buys. Market internals indicate a 4% increase in turnover and a 19% increase in open interest.