Keep an eye on copper to gauge trends in the industrials space

The markets witnessed a higher turnover week as trader participation perked up on the back of buoyancy in the industrials and energy counters.

Safe-haven buying continued in bullion and agri-commodities occupied a back seat. The MCX logged a 10% gain in turnover on a week-on-week basis and a 6% dip in open interest in the same period. The impeding expiry on base metals and silver saw the usual pre-expiry unwinding, which explains the decline in market-wide open interest.

Turnover gainers were almond, aluminium, copper, gold, lead, natural gas and silver. Open interest gainers were almond, aluminium, cardamom, chana, gold, mentha oil, nickel, potato, refined soya oil and wheat. US non-strategic crude reserves rose by 2 million barrels to the 365.1 million barrel mark. However, tropical storms / hurricanes near the US coast kept oil prices buoyant.

Metals

Aluminium remains in a lower tops and bottoms formation even as the week-on-week closing is positive. The bulls will have to defend the Rs 87 levels stoutly if the upmove is to gain momentum in the coming week.

Hold existing longs for now, should the Rs 94 hurdle be overcome forcefully, expect an acceleration in the upsides. Market internals indicate a 27% increase in turnover and a 28% increase in open interest.

Copper has seen a sharp rally on the eve of its June series expiry and can go to the Rs 327 levels before selling pressure is witnessed. The red metal will be a bellwether for its base metal peers and needs monitoring to gauge trends in the industrials segment. Hold longs for now. Market internals indicate a 13% rise in turnover and a 20% fall in open interest as longs were pruned pre-expiry.

Gold has exhibited a dragonfly （tonbo） doji on the weekly charts, which indicates indecisiveness and the inability of bulls to take the metal past the previous weekly highs. Monitor Rs 18,500 level as a near-term support, below which the bears may get aggressive. Fresh buying must be postponed till the 19,000 level is overcome on a sustained closing basis. Market internals indicate a 10% increase in turnover and a 8% rise in open interest.

Nickel has seen a rally in tandem with its base metals peers and the Rs 890 level may be treated as a short-term floor for now. The bulls will need to keep the counter above the Rs 955 levels for most of this week if the uptrend is to gain momentum. Market internals indicate a 7% decline in turnover and a 20% increase in open interest.

Silver has displayed marginally higher relative strength as compared to gold and a rough and ready long-legged doji on the weekly candle stick charts. These are indications of price discovery in the near term as bulls and bears attempt to overpower each other. A sustained trade above the Rs 30,000 levels is needed to push prices significantly higher. Market internals indicate a 34% increase in turnover and a 2% decline in open interest.

Zinc has witnessed a strong surge in bullish sentiments as the counter overcame the prior week’s bearish range in a bullish engulfing pattern. The Rs 88 level will be a area to watch as a sustained trade above this level will put the bulls firmly in the driver’s seat. Market internals indicate a 1% fall in turnover and a 34% dip in open interest as the June series expiry approaches.