Commodities outlook and trading ideas by Tradebulls for today

Commodities outlook and trading ideas by tradebulls for today

Commodity outlook by Bhavik Patel - Sr. Technical Analyst (Commodities)
 
Outlook:
 
The resurgent in US Dollar index has put pressure on commodities across the board. Precious metals are negatively co-related with US dollar and so as expected, we are seeing selling pressure in Gold and Silver. Gold failed to sustain the uptrend on weekly chart and now appears to pull back towards its 50 percent retracement level of $1302 in COMEX.  However in MCX because of weak Indian Rupee, MCX Gold still has not retraced as much as gold in COMEX but we still expect Gold to retrace to Rs. 30,000 levels on back of strong US Dollar. Gold bulls will try to defend $1300 level and we expect some bounce back around that level. Silver is underperforming Gold by large margin as Gold: Silver ratio again has come to 80:1. Inspite of such underperformance, silver still is expected to underperform gold in near future and levels of Rs.38050 cannot be ruled out in MCX.

 

Crude Oil was already under pressure on account of rise in US Dollar but this week the inventory reported by EIA gave bears support to short crude.  The inventory came higher than expected and rising US Crude oil production is putting added pressure on the prices. Crude Oil right now is looking for any positive development to keep the Brent Crude price above $63. We believe $60 will not be breached easily as previously too we have seen swift recovery when Brent went below $60.
 
Base metals this week remained under pressure because of strong US Dollar. Adding to the weak sentiment was the macro economic data from China in form of Manufacturing and Non-manufacturing PMI which came lower than expected. Prices still remain weak but we feel the panic is over. It is still early to say bottom has been placed but we expect sideways consolidation from here. 

 
Buy Aluminum
 
Target: 143
Stoploss: 137.60
 
Aluminum has been bucking the trend. All base metals barring Nickel are facing selling pressure but aluminum after underperforming in January finally is showing some strength. Intraday recovery in last couple of trading session indicates buying emerging from lower levels. Defending level of 139.45 consistently is a testament of strength in aluminum. Because of strong Dollar, we don’t see too much upside but 143 level can be tested in near term and so we advocate long position from here with stop loss of 137.60.
 
Buy Natural Gas
Target: 182
Stoploss: 168

 
Natural Gas has made double bottom on daily chart around 164 levels. Since mid of February, natural gas has been making bottom and any intraday dip has quickly being bought into. The warm weather in US is creating headwinds but we find it unpleasant to create short position looking at the risk reward ratio. Momentum indicator is comfortably above 0 indicating that upside momentum still is intact. Absence of any divergence on oscillators gives us confidence to create long position with stop loss of 168 and target of 182.
 
Sell Lead
Target: 160
Stoploss: 166
 
Emergence of nearly 13,000 tonne of inventory in LME has kept lead prices under pressure. Weak Chinese macro economic data and strong US Dollar has also added woes to the already underperforming metal. The recent selling has been swift so we do advocate waiting for some bounce back around 164.50 before creating short position. Lead is trading below its 20 and 50 day moving average which is fair indication of its negative trend in short and medium term. RSI_14 is also trading below its mean average of 50. We expect the weakness to continue as there are no near term support on charts.   Any near term support is around 160 and so we recommend creating short position in Lead near 164.50 for target of 160 and stop loss of 166 closing basis.