Commodity Analysis

Commodity Top Five

Akhil Nallamuthu | Updated on August 25, 2019 Published on August 25, 2019

MCX Crude (₹3,863)

The MCX Crude September future contract consolidated between ₹3,935 and ₹4,080 during the past five trading sessions. But in the second half of Friday’s session, the contract broke below the range with high volume over concerns on growing global growth.

The contract made a low of ₹3,832 on Friday and ended the week at ₹3,863. The price also broke below the 20-day and 50-day moving averages, making the fall significant. The contract’s price was rejected for the third time at ₹4,050, maintaining the long-term bear trend intact; ₹4,050 is the key level that must be breached for the commodity to reverse the trend in its favour. With this breakout, the commodity future is expected to head south.

The price could find an immediate support at ₹3,825, a break below which will invite more bears, and the contract may decline to ₹3,650 in the near term. Alternatively, a rally from the current level will take the contract to ₹4,000 and ₹4,050, which is a supply zone.

MCX Gold (₹38,765)

MCX-Gold October Futures contract was in an uptrend without much volatility, posting gradual gains in the past week. The contract was also trading within a broader range between ₹37,620 and ₹38,660. On Friday, there was a strong rally towards the end of the session, triggered by the latest trade war tensions, as the demand for safety accelerated.

As a result, the price broke out of the broad range and ended the week with a 2.2 per cent gain at ₹38,765. On the back of this strong volume breakout, the yellow metal appears to have resumed its bullish trend after taking a pause over a couple of weeks. One can also observe a bullish flag, a trend continuation pattern.

With renewed interest in gold, the price of the contract can appreciate to ₹39,700. On the other hand, if the price falls back into the range, the breakout could be negated and the price could depreciate to ₹38,215, where the fall could get arrested.

MCX Silver (₹44,602)

The September contract of silver traded similar to that of gold, and gained marginally along the week. The broader range of the contract extended from ₹42,850 to ₹44,520. The rally in price in Friday’s session moved it to a close of ₹44,602, resulting in a 1.7 per cent weekly gain.

The commodity ended the week on a very strong note with an upward breakout against the recent consolidation, increasing the possibility of further appreciation in the coming days. The major trend of the metal continues to stay positive and the September futures contract faces the nearest resistance at the psychological level of ₹45,000.

However, if bulls gain traction backed by more buying, the price might move upwards to the level of ₹45,810 as indicated by the Fibonacci extension. If the metal declines back into the range, the silver futures contract might depreciate to ₹44,000, which will be a considerable support.

MCX Copper (₹440.05)

August futures of the base metal began the week on a positive note, but faced a strong band of resistance in the ₹450-452 area. Henceforth, the contract weakened and continued to decline through last week. The downtrend accelerated towards the end of Friday’s session and marked a low of ₹439.50 before closing at ₹440.05, with the futures losing 1.85 per cent for the week.

The contract also closed below the 20-day moving average, opening the door for further depreciation. However, the 61.8 per cent Fibonacci retracement of the previous up-trend falls at the ₹440 level and it managed to support the metal around that price level. Charts indicate a strong bear trend, and the contract price is expected to fall to ₹435.65. Below that level, ₹432.55 will act as a strong support.

If the price bounces from the Fibonacci retracement, the revival will face stiff resistance immediately at ₹441.35, which is less likely to be broken.

NCDEX Castor seeds (₹5,744)

August futures contract of castor seeds was the most active among agricultural commodities. On Friday, after reaching a low of ₹5,552, the futures contract ended the week higher at ₹5,744. In fact, it posted a strong daily gain of 1.9 per cent. Even though it is one of the most liquid commodities, the trend remains largely flat over longer time-frames — between ₹5,575 and ₹5,760.

Moreover, the price did not break out of the range and, hence, a wait-and-watch approach is needed to further review the direction in which the price could potentially break out. In the event of a continuation of Friday’s trend and if the contract manages to break above the upper band, there will be a short-term uptrend, making the price reach ₹5,940.

Alternatively, if the price gets rejected from the ₹5,760 levels, it could decline to the lower end of the sideways trend i.e., ₹5,575, which will act as a support.

Published on August 25, 2019
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