19/07/2010 (DNA India) - The markets witnessed a nervous week as prices eroded on the back of unwinding of positions and as traders preferred to raise cash levels.

Profit-sales were prominent in industrials and bullion alike as the de-leveraging process gained momentum. The MCX’s week-on-week turnover was 13% higher and the marketwide open interest was 14% higher. The volume gainers were almonds, aluminium, cardamom, chana, copper, crude oil, crude palm oil, gold, lead, natural gas, potatoes, refined soya oil, silver, wheat and zinc.

The open interest gainers were almonds, copper, crude oil, crude palm oil, gold, lead, mentha oil, nickel, potato, silver and zinc. The US’s non-strategic crude oil inventory fell by 5.1 million barrels to the 353.1 million barrel mark. The volatility in the dollar kept traders on the edge and the choppiness is likely to persist in the near term. Traders are advised to proceed with caution on all fresh longs.

Agri commodities
Chana has managed a close above the Rs 2,225 levels and the close was in the upper end of the weekly range. While this is a sign of optimism, follow-up buying on higher volumes is needed to push prices higher sustain ably. Existing longs if any may be held with a stop-loss at the Rs 2,190 levels. Market internals indicate a 64% increase in turnover and a 2% decline in open interest as the bulls unwound longs.

Mentha oil is appearing to consolidate as the weekly chart shows an inside formation. The Rs 670 level will need watching as a near-term support below which the bears may attempt to enhance short positions. Initiate fresh longs only above the Rs 715 level on a sustained closing basis. Market internals indicate a 44% decline in turnover and an 8% increase in open interest.

Refined soya oil has seen a confirmed breakout above a congestion band as the price made a spectacular rally after a long hiatus. The price must stay above the Rs 458 level on a closing basis if the uptrend is to sustain itself. Market internals indicate a 30% increase in turnover and a 28% decline in open interest as bulls unwound some positions.

Metals
Aluminium managed to make a higher ‘tops and bottom’ formation on the weekly chart but the close was in the negative and the higher levels were unsustainable due to the lack of buying conviction. Traders may initiate fresh longs only above the Rs 94 level and that too on a sustained closing basis and on higher volumes and open interest expansion. If the prices breach the Rs 90 levels forcefully, the declines may gather momentum. Market internals indicate a 36% increase in turnover and a 1% decline in open interest.

Copper is indicating a lower tops formation and that is a sign of weakness. The decline is materialising in steps and should the Rs 302 level be breached sustainably, the outlook can weaken further. Only a consistent trade above the Rs 316 levels will see fresh upsides in the near term. Market internals indicate a 21% increase in turnover and a 35% increase in open interest.

Gold has recently lost its short-term upward momentum as it tested the Rs 18,250 level, barely managing to close above this threshold. This week may see some more downside if the follow-up buying is not forthcoming. Watch the Rs 18,180 level keenly, as below this level the bears are likely to press fresh short sales. On the flipside, the bulls are likely to return with strength above the Rs 18,800 level only. Market internals indicate a 1% hike in turnover and a 9% rise in open interest.

Nickel remains entrenched in a band between the Rs 875-940 levels and a breakout / drawdown beyond these parameters will be required to extend the move in the direction of the breakout/breakdown. Cues may be taken from copper in the near term, though both may not be moving in lock-step with each other. Market internals indicate a 3% decline in turnover and a 35% increase in open interest.

Silver has reacted lower in tandem with gold, but continues to exhibit a higher relative strength vis-a-vis the yellow metal. The Rs 27,875 level will be a short-term support level and Rs 30,200 as a resistance, above which the bulls may return with strength. Market internals indicate a 16% hike in turnover and a 12% rise in open interest.

Zinc has exhibited an unbroken alternation between bullish / bearish closings after the week ended June 19, 2010, which indicates an even match between the bulls and bears, though the bias is marginally tilted towards the bulls. This week, watch the Rs 80 level as a support below which the bears may attempt to push prices lower. On the other hand, a sustained trade above the Rs 88 levels will see a rally. Market internals indicate a 19% increase in turnover and a 66% increase in open interest.

Energy
Crude oil remains marginally below a congestion hurdle at the Rs 3,675 level, which must be overcome if the bulls are to prevail over the bears. On the flipside, a sustained trade below the Rs 3,440 levels may see the bears go on the front foot. Market internals indicate a 24% increase in turnover and a 10% increase in open interest.

Natural gas saw a rebound in the latter part of the week and is likely to witness some bear covering as long as it trades above the Rs 210 levels. There is a likelihood of profit-sales at higher levels as overhead supply is likely near the Rs 240 levels. Market internals indicate a 26% increase in turnover and a 20% decline in open interest.