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Commodities Outlook and trading ideas by Tradebulls for today

Commodities Outlook and few trading ideas by Bhavik Patel - Sr Technical Analyst (Commodities) at Tradebulls

Bhavik Patel 

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Commodities Outlook: The Commodity market is trading counter intuitive. All commodities barring natural gas exploded on higher US inflation data. Usually higher inflation means more aggressive US Fed. Higher inflation means higher interest rate from US Fed which pushes dollar stronger and lower gold prices. But yesterday commodity market, as well as stock market exploded which only means market perceives that US Fed will remain behind the curve. The sharp price appreciation in bullions also comes from weak handed shorts in future who were forced to cover their bets. Gold is already trading above its important moving average and its next near term target is January’s high of $1365.87. Gold's next longer term upside price objective is the 2016 high of $1,377.50. With yesterday’s positive movement, more gains are likely in near term.

Crude Oil prices rose as US crude stocks rose less than expected. Risk aversion took backseat sending US dollar plunging and causing Crude oil to stage comeback and paring a third of the losses sustained in February. Crude oil prices may have recovered but US output remains at record high which will make this rally difficult to sustain.

Base metals saw sharp price appreciation on the double whammy of weak US Dollar and short covering by investors ahead of Chinese New Year holiday. The metals have started to renew demand as optimism regarding growth continues and we expect Nickel, Zinc and Lead to lead further gains on back of depleting LME inventory and tight physical market.

Buy Zinc

MCX Zinc rallied from 198.55 to 229.85 within span of 2 months and then retraced back to 216.60. The recent support of 216.60 it took is exactly at 61.8% retracement and from there; again we are witnessing the positive momentum and is on the cusp of 229.80. The momentum looks strong and it is trading well above its short term moving average of 20 days so we would recommend long position with stop loss of 225 and target of 238.

Sell Copper

The recent rally in copper from 432.30 till 458.8 has been rapid and exhaustion may become factor now with possible pull back till 445. The broader trend still looks weak with lower top and lower bottom formation. Copper may catch some friction around 462.20 levels. Copper tried unsuccessfully to scale the level of 462.30 the whole January and so copper needs to rally above that level to break the lower top formation. Trading shorts could be initiated with stop loss above 464 for target till 445.

Buy Nickel

Higher top and higher bottom formation in Nickel is endorsing our buy recommendation. Nickel off late has been outperforming other base metals and has already closed above its previous resistance of 898 comfortably.  The recent correction in Nickel was shallow compared to other base metals again giving indication of its strength. The oscillators namely RSI_14 is at 66 and we are comfortable initiating long position with target of 925 and stop loss below 885 on closing basis.

Disclaimer: The analyst may have positions in any or all the stocks mentioned above

First Published: Fri, February 16 2018. 08:30 IST