Commodity Analysis

Weekly trading guide - Commodities

Akhil Nallamuthu | Updated on September 21, 2019 Published on September 21, 2019

MCX Crude (₹4,172)

The October expiry futures contract of crude oil witnessed violent moves during the past week because of geopolitical reasons. The contract opened at ₹4,000 and moved up at a breakneck speed to a five-month high of ₹4,544, posting one of the biggest single-day gains. Subsequent trading sessions saw the price decline rapidly to ₹4,140, giving up most of the gains as constant news flows kept volatility at elevated levels.

Thus, the price has dipped below the key price band between ₹4,200 and ₹4,230. Volumes increased considerably in the last two trading sessions, but the price remained sluggish, increasing the chance for a prolonged consolidation.

If the contract moves up, it will face a hurdle between ₹4,200 and ₹4,230. Beyond that, it may rise towards ₹4,400. On the other hand, if it faces selling pressure, it will find supports at ₹4,060 and ₹4,000.

MCX Gold (₹37,727)

The October futures contract of gold began the week on a positive note as it opened at ₹37,774 and closed at ₹38,180 on Monday, posting a gain of 1.75 per cent. This was preceded by a gradual decline for seven consecutive trading sessions. However, the price started to moderate again, and made an intra-week low at ₹37,438 — the 50-day moving average — on Friday, and ended the week at ₹37,727.

The contract currently seems to be trading in a tight range between ₹37,438 and ₹38,215. A decline below ₹37,400 levels may invite more bears because a break below that level might change the medium-term trend to bearish and the contract might dwindle to ₹36,700, the 38 per cent Fibonacci retracement level.

But in the event of the bulls gaining traction, the price will find a hindrance at ₹38,125, beyond which it will appreciate towards ₹38,650.

MCX Silver (₹46,523)

The December month futures contract of silver, like that of gold, opened the week on a positive note at ₹46,100, and closed Monday’s session at ₹47,218 with a 3.2 per cent gain. However, the positive sentiment did not sustain long as the contract price dropped to an intra-week low of ₹45,900, briefly trading below the ₹46,000 level, subsequently closing the week at ₹46,523.

On viewing the chart, one can observe that the price is oscillating within a range between ₹45,900 and ₹47,440, and is currently trading below the 21-day moving average, implying a weakness. So, if the price breaks below ₹45,900, it may slump to ₹45,130, the 61.8 per cent Fibonacci retracement level of the previous bull trend.

Below that, the sell-off could intensify, and the contract may weaken to ₹44,860 in the medium term. Alternatively, if the contract gains, the price could appreciate to ₹48,000 levels.

MCX Copper (₹443.5)

After showing signs of an uptrend by breaking above crucial resistance levels, the September month futures contract of copper reversed the trend abruptly and tumbled last week to a low of ₹442.5, before closing at ₹443.5. The commodity contract posted a loss of 3.6 per cent for the week. In fact, the price has slumped below key support levels at ₹455 and ₹450.

Apparently, it has also dipped below both 21- and 50-day moving averages, possibly indicating further depreciation. It is highly likely that the bearish momentum will sustain and will be carried over to the upcoming sessions. As a result, the contract will most probably weaken further from the current level towards ₹436.5 in the coming days, below which the next support comes in at ₹434.4.

On the other hand, if it manages to arrest the decline and move up, it will face significant resistance at ₹450 levels.

NCDEX Castor seed (₹5,866)

The October expiry futures contract of castor seed began the week on a muted note at ₹5,812 and traded flat for a couple of sessions. The contract price then accelerated on the upside to a weekly high of ₹6,000 — a key psychological level. The momentum could not sustain as the contract faced selling pressure, and it gave up most of its gain, closing the week one per cent higher.

It declined to an intra-day low of ₹5,862 on Friday before closing the session at ₹5,866. The contract has managed to trade above the 21-day moving average throughout the month, illustrating a bullish bias. If the contract attracts buying interest, it will most likely retest the previous high at ₹6,000 and it can potentially appreciate to ₹6,042.

However, any further weakness can drag the price lower to ₹5,818, below which ₹5,800 is the support.

Published on September 21, 2019
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