Base metals to remain under pressure if dollar strengthens

Markets witnessed a lower turnover week as trader participation contracted due to profit sales, on advances. Bulls nursing longs were meeting margin calls. The MCX’s week-on-week turnover declined 9% and market-wide open interest fell 1%. The turnover gainers were almonds, aluminium, chana, crude palm oil, gasoline, nickel, platinum, potato, soybeans and steel (GZB). Open interest gainers were almonds, crude palm oil, gasoline, lead, mentha oil, platinum, potato, soybeans, steel (GZB) and wheat. Agri-commodities Chana has witnessed a bullish doji on the weekly charts as the weekly close has been significantly higher than the weekly lows. The Rs 2,225 will now be the near-term support to watch out for, as the bulls will need to defend this support. As long as the counter trades above the Rs 2,340 levels, expect optimism. Market internals indicate a 68% increase in turnover and a 7% decline in open interest. Mentha oil has retraced almost the entire gains made last week and made an inside formation on the weekly chart as the weeks range was within the prior weeks range. That indicates consolidation before the next move occurs in either direction. Watch the Rs 595 level keenly for signs of support, below which the bears may attempt a fresh aggression. Market internals indicate an 11% decline in turnover and a 1% increase in open interest. Refined soya oil is appearing weak as the weekly charts indicate a fortnight of declines. The counter is appearing to close a gap on the charts on November 21, 2009. The closing below the Rs 464 has confirmed the closure of this gap. For bullishness to begin on this counter, the Rs 490 hurdle must be overcome on high volumes. Market internals indicate a 39% decrease in turnover and a 42% decline in open interest. Metals Aluminium has logged a doji on the weekly chart for the third week in a row, this time a crude long-legged doji. These are indications of an indecisive phase in the markets as bulls and bears hash it out for supremacy. Fresh buys are justified only after a breakout past the Rs 108 levels is seen with higher volumes and open interest expansion. On the flip-side, a consistent trade below the Rs 102 levels will spell weakness in the near term. Market internals indicate a 7% increase in turnover and an 18% decline in open interest. Copper has retraced to test the support provided by a bullish trendline. This week must see the counter staying above the Rs 332 levels, especially on a closing basis. The profit-taking bias may continue, especially if the US dollar strengthens. Market internals indicate a 4% decline in turnover and an 8% decline in open interest. Gold has witnessed an outside formation as the weekly range was wider than the previous week’s range. That shows a bearish pressure on the yellow metal as long as the bulls don’t smash past the Rs 17,000 barrier forcefully. Fresh buys are advocated only above this threshold and the Rs 16,400 level must be watched as a near-term support. Market internals indicate an 8% decline in turnover and a 7% decline in open interest. Nickel has derived support at the upper trendline of a bearish channel, which will be a flag formation as and when the Rs 900 hurdle is overcome forcefully. Watch the Rs 790 levels as a support area and a breakout past the Rs 900 mark as a buy trigger. Market internals indicate a 21% increase in turnover and an 8% decline in open interest. Silver has shown a sideways closing even as gold declined week on week. The relative strength of silver is higher than that of gold and the Rs 28,750 hurdle needs to be overcome forcefully if the bulls are to return in large numbers. Any close below the Rs 27,700 levels will see the bears enhancing their exposure. Market internals indicate a 24% decline in turnover and a 6% decline in open interest. Zinc has logged the second weekly negative close even as volumes expanded sharply. These are indications of a bearish outlook in the near-term and fresh declines cannot be ruled out as the base metals segment remains under pressure from a rising dollar. Fresh buying is not advisable unless the Rs 120 hurdle is overcome. Market internals indicate a 10% decline in turnover and a 2% decline in open interest. Energy Crude oil has witnessed a formation of a double top formation at the Rs 3,800 level and unless this hurdle is overcome, fresh buys should not be contemplated. Watch the Rs 3,510 support this week. The US non-strategic inventories increased by 3.70 million barrels, which also exerted downward pressure. Market internals indicate a 5% decline in turnover and a 2% decline in open interest. Natural gas has exhibited a doji formation as the weekly open and close are almost identical. The Rs 245 level is now the near-term floor and the bulls will need to defend this level vigorously. Buying should be contemplated only above the Rs 265 levels on a sustained trade basis. Market internals indicate a 10% decline in turnover and a 2% decline in open interest.