Commodities Outlook and trading ideas by Tradebulls for today

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

Gold and Silver continues to ignore US economic data with weaker than expected home sales data failed to push prices higher. The main culprit behind the weakness was rise in US Dollar as Fed meeting minutes showed that they are in line to raise interest rate atleast 3 times this year. We could see rise of 25 basis points in this March itself. Higher interest rates have flowed into a stronger dollar which has been negative for gold and investors are lightening up on the gold market. The US 10-Year Yield jumped after Fed minutes and is at 4 year high. We have seen negative co-relation between gold and US 10-Year Yield and rising yield will create headwinds for bullions in near term.

Increasing US Rig count and exports may cap the upside for crude. The US rig count has reached its highest point in almost three years. Even though we saw correction from $70 to $61.8 in Brent, surprisingly prices recovered showing market is in risk off mode. The speculative position shows that long positions in Crude have started to unwind.

Two weeks ago metals prices were selling off and last week they were rebounding. However this week they are consolidating and with China on holiday so far this week, we are not surprised prices are rudderless, with a slight weaker bias.

Sell Zinc

Target: Rs 222

Stoploss: Rs 230

Emergency of negative divergence in daily chart of Zinc has warranted caution on the ongoing rally. With base metals starting to slide down, we expect Zinc to follow pursuit. The upside momentum will start if Zinc manages to sustain above 230 closing basis as previously we saw fair bit of resistance around that area. The oscillators have started curving downwards which hints at profit booking. We recommend selling Zinc with target of 222 and stop loss of 230 on closing basis.

Buy Natural Gas

Target: Rs 182

Stoploss: Rs 165

Natural Gas has made double bottom near 163 and recent price action does dictate that bottom has been placed for time being. The major trend is negative and shorting from here will be unpleasant looking from risk reward scenario. The previous rally from 165 till 196 seems similar to the pattern that is playing out now.  The RSI_14 has emerged from oversold region giving us confidence that the rally on the upside should gather momentum. We recommend creating long position with target of 182 and stop loss of 165.

Sell Silver

Target: Rs 37,500

Stoploss: Rs 39,000

Silver has been underperforming compare to gold and broader trend remains weak. The prices reluctance of trading above 200 day moving average shows its underlying weakness. At present Silver is trading below all its important moving average. The emergence of lower top and lower bottom formation seen since this month warrants us to initiate short position with target of 37500 which is near to its previous support and stop loss of 39000 which last week it failed to scale.

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