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) at Tradebulls:

The US Dollar index flirted with the level of 90 as US employment data came better than expected. Generally with such better than estimated data, market would have screamed “Buy Dollar” but market instead choose to see the disappointing wage growth data which came at 0.1% while expectation was 0.2%.  So this week we are seeing US dollar weakness creeping back again as market perceives that US Fed will increase rates 3 times a year and won’t be aggressive in rate hikes.

Precious metals meanwhile are going nowhere and trading in tight range. Gold has been fluctuating between $1313-$1330 with no clear direction. Near term headwinds in precious metals is expected as on 21st March, US Fed might increase the interest rate by 25 bps. Historically we have seen gold and silver remaining subdued before rate hike. Similar scenario is expected to play out but we don’t see too much of correction right now. $1300 seems to be good support for gold now.  For further hikes, gold needs to move above the trading range of $1338.

The crude build this week was much higher than expected and so crude oil prices are again under pressure.  Brent Crude though is stubbornly holding on the levels of $63 and any further weakness can only come below this level. In MCX, 3900 is the level from which we have seen Crude oil bouncing back.  The lower high on daily chart do point out that bulls are unable to extend any upside rally and sellers are quick to pounce on any upmove. We expect the downside to continue but it would be a slow correction

Base metals this week paint mix picture. Zinc continues to languish on account of higher LME inventory while Lead and Nickel are bucking the trend and continues to perform. Copper is trading sideways while aluminum fails to attract any bottom fishing buyers. We don’t expect too much correction going on as we have already seen much needed correction in base metals and now we expect some short covering in mainly Lead and Copper while expect Zinc and aluminum to trade sideways. The news of labour dispute in Chile (World’s largest copper producer) may support prices in future. Now further downside can only come if we see large physical quantities in LME warehouse. But this week, we expect base metals to trade sideways namely Zinc and Aluminum while Lead, Nickel and Copper will trade with positive bias.

Buy Lead
TGT: Rs 160
Stoploss: Rs 153

Momentum indicator RSI_14 has bounced back after touching the oversold region of 30 and now is trading at 41. The daily price action too suggests bottom has been placed and we expect relief rally in Lead. The 20 day moving averages have started curving upwards indicating we may see upside from here. The resistance comes around 160 which is 200 day moving average. Lead has respected the support of 150.65 which also is the 23.6% retracement taken from the high of 172.5 and low of 143.10. Lead has successfully closed above its 38.2% retracement level of 154.3 and now next target is 50% retracement of 158. The cancelled warrant ratio in LME jumped significantly also indicating bullish stance and so we recommend going long in Lead with target of 160 and stop loss of 153 closing basis.

Sell Crude
TGT: Rs 3,800
Stoploss: Rs 4,100

The conflux of moving average 13, 20 and 50 all have started drifting lower in Crude on daily chart. The crossover in short term moving average of 13 and 20 day already has happened and now crude is trading below its 50 day moving average suggesting negative trend. The lower high on daily chart also indicates weakness at the top. At present crude is taking support at its 38.2% retracement level of 3903 taken from high of 4172 and low of 3737. The range is getting smaller so we expect big move in coming days.