Maintain long bias on base metals as action in the space will continue this week

Mumbai: Markets witnessed higher turnover activity as the strength in the industrials and energy spheres drew the attention of traders.

MCX logged a 10% increase in marketwide turnover and a 5% rise in marketwide open interest week on week.

The turnover gainers were aluminium, chana, copper, crude oil, crude palm oil, gasoline, gold, lead, mentha oil, natural gas, nickel, potato, refined soya oil and zinc.

Open interest gainers were almonds, aluminium, cardamom, copper, crude oil, crude palm oil, gold, lead, mentha oil, potato, refined soya oil and silver.

This week is likely to see action continue in the base metals space. Maintain a long bias on these counters.

Metals

Aluminium has moved in a higher ‘tops and bottoms’ formation for the fourth week, indicating bullishness.

The Rs 94 hurdle has been effectively overcome and as long as bulls manage to keep the counter above this threshold, the outlook will be positive.

Maintain a bullish bias. Market internals indicate a 32% rise in turnover and a 9% rise in open interest as bulls enhanced their overnight exposure.

Copper has played the part of the base metals bellwether rather convincingly. The upthrust was on robust volume expansion and open interest addition as the bulls added overnight long positions.

The counter should not dip below Rs 316 if uptrend is to persist.

Maintain long positions for now. Market internals indicate a 23% rise in turnover and an 18% rise in open interest.

Gold has slipped for the fifth week running. A sustained close below Rs 18,200 will see an accelerated decline and the momentum may gather force if the Rs 18,375 level is not tested and overcome in case of a rally.

Take a cautious approach and abstain from longs for now. Market internals indicate a 1% rise in turnover and a 3% rise in open interest.

Nickel posted its highest weekly close since May 29, 2010, indicating optimism. Bulls must keep the prices above the Rs 930 levels on a closing basis if the upthrust is to sustain in the near term.

Overall, the outlook remains positive and a long bias should be maintained. Market internals indicate a 36% increase in turnover and a 44% decline in open interest.

Silver must remain above the Rs 28,250 levels if the bulls are to retain some hold on the sentiments.

A clear breakout will need a sustained close above Rs 30,250 with higher turnover and open interest expansion. Hold existing longs, but do not add fresh longs on declines.

Market internals indicate a 6% decline in turnover and a 10% rise in open interest.

Zinc has closed at its highest weekly close after May 15, 2010, which is an indicator of optimism.

Coupled with copper, this metal exhibits the highest potential in the base metals sphere and all existing longs may be maintained.

A sustained trade above Rs 92 will see a fresh upward breakout and add to the bullish momentum. Market internals show a 36% rise in turnover and a 19% fall in open interest as short-term players unwound positions.

Energy

Crude oil has rallied and is gathering momentum on the upsides. A breakout past Rs 3,840 on higher volumes and open interest expansion will see a bear squeeze in addition to fresh buying and the bulls will witness a fresh rally.

Maintain a long bias in the near term. Market internals indicate a 13% rise in turnover and a 16% rise in open interest.

Natural gas has seen a ranged move as the bulls and bears slugged it out. Only a sustained trade above the Rs 235 levels will see a fresh breakout and a decline below the Rs 208 levels will see bears pressing fresh sales.

Market internals indicate a 9% increase in turnover and a 19% decline in open interest.