Commodity Analysis

Weekly trading guide - Commodity Top Five

Akhil Nallamuthu | Updated on September 15, 2019 Published on September 15, 2019

MCX Crude (₹3,928)

 

October futures contract of crude oil, which has been trading within a range between ₹3,850 and ₹4,100 for the past two months, seemed to have broken out when the contracted opened at ₹4,100 last Monday and closed the day at ₹4,170. But it could not appreciate further, and faced a hurdle in the form of a resistance band between ₹4,200 and ₹4,230 levels.

Selling pressure increased and the contract dipped towards the lower boundary of its range at ₹3,850, invalidating the breakout. Hence, for the commodity to post a significant recovery, it is not only necessary that it breaks above the upper limit of the range, but also the resistance at ₹4,230.

In the event of the contract breaking above ₹4,230, it will most likely rise towards ₹4,400 in the medium term. But, if it faces further selling pressure and breaks below ₹3,850 , the price may decline to ₹3,650.

MCX Gold (₹37,524)

 

October futures contract of gold declined throughout the week. On Friday, the contract opened and slid through the session, and ended the week at ₹37,524, breaking below an important support level of ₹37,620, which opens the door for the possibility of further depreciation.

The contract also breached the support at ₹37,915 — the 23 per cent Fibonacci retracement level of the previous uptrend extending from May to September. The short-term downtrend that the yellow metal is currently witnessing will drag the price to the dynamic support offered by the 50-day moving average at ₹37,105 levels.

In case the price breaks below that level, it could slump to ₹36,700 in the medium term. However, if weakness is arrested, resulting in an upward movement, the recovery will face a hurdle immediately at ₹37,620, beyond which ₹38,000 will be a psychological level.

MCX Silver (₹45,761)

 

Though the December futures contract of silver stayed flat in the first half of the week, the contract was sold off considerably on Friday where it opened at ₹47,052, and ended the session 2.9 per cent lower at ₹45,761. During this downfall, the contract also closed below the 21-day moving average, indicating a potential extension of the prevailing short-term bearish trend.

Noticeably, it was on Friday that the contract witnessed selling pressure in the past two weeks of trading, wrapping the week with negative sentiments on both the occasions. The existing bear trend is expected to continue, and in all likelihood, the contract can slump to ₹44,860 in the near term.

The 50-day moving average is at ₹44,125, and along with ₹44,000, it will act as a substantial demand zone. In case the contract attempts to recover, it will face a resistance at ₹46,425 levels.

MCX Copper (₹459.95)

 

September expiry futures contract of copper was in a consolidation phase last week until Friday, when it moved up sharply by gaining 1.6 per cent and ended the session at ₹459.95. The contract seems to be building on the momentum it carried over from the previous week, as a result of which the price has moved past the important level of ₹455, increasing the probability of further appreciation.

The daily relative strength index confirms the strength of the bull trend. On the back of renewed buying interest, there is a high chance that the bullish momentum will sustain and the contract will appreciate further towards ₹470 levels in the near term, beyond which the immediate resistance is at ₹475.

In an unlikely event of the price moderating because of an exhaustion in its bullishness, ₹455 will help limit the downside, below which ₹450 is a key support.

NCDEX Guar seed (₹4,189)

 

September futures contract of Guar seed opened the week on a flat note at ₹4,144 against the previous close of ₹4,132. The contract witnessed good buying interest midweek, and the price gained to an intra-week high of ₹4,280, where it was capped by the 21-DMA.

On Friday, the contract gave away some of its gains and closed lower by 1.6 per cent at ₹4,189. The price range between ₹4,270 and ₹4,280 is a strong supply zone where the contract will face considerable selling pressure. Hence, for the commodity contract to reverse its existing downtrend, the price must break out of those levels. It will face a stiff resistance between ₹4,270 and ₹4,280.

If the contract manages to break above those levels, it has the potential to rise towards ₹4,460. Immediate support at ₹4,165 any further weakness may drag the contract lower to ₹4,075.

Published on September 15, 2019
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