Commodities outlook & stock picks by Tradebulls Sec: Sell silver, aluminium

Indian rupee has depreciated and trading at 8 months low as sell off is being witnessed heavily in equity markets. All emerging market currencies are depreciating and we are seeing intervention from RBI. Bank of England made a surprise rate cut of 50 bps taking its interest rate at a record low of 0.25 per cent. Earlier this month, US Fed too had made emergency rate cut by 50 bps and other central banks will also follow suit. The rate cuts will depreciate all currencies against US Dollar. Until the situation improves regarding coronavirus, we might rupee trading weak and may even test 75 levels. Next immediate support comes at 73.70-73.50 and resistance at 75.

Bullions were also not spared when WHO declared coronavirus to be pandemic. Equity class has seen a massive sell off and investors are looking for assets to sell not bothering to see which asset to sell but finding which assets they can sell. After making a double bottom around $1714, gold has shifted down below $1650. Next support comes around $1620. We are neutral in gold and silver as inspite of fear in the market, investors are going for safe haven bonds and Japanese Yen. In the next few weeks, we might see more stimulus from other countries which might cap upside on gold and silver.

Crude oil this week saw the biggest fall since 2008 when OPEC+ deal crashed. After fall of 30 per cent just when crude was recovering, again WHO declaring coronavirus pandemic has given fresh legs to bears. We don’t think crude may sustain below $30 in Brent and has good support around $32. Crude oil prices will remain volatile going forward as statements from Russia and OPEC will likely move the prices in a big way. Going forward, we don’t see too much upside in Crude oil as demand has really taken hit because of coronavirus and now travel ban being implemented by many of the countries and increase in supply as Saudi Arabia is looking to ramp up its production and gain market share. Similarly, Russia and Saudi Arabia are trying to break US Shale industries so expect crude oil prices to remain depressed for the next 1 to 2 months.

Recommendation

Sell Silver below 45200 | TGT: 44,000 | Stoploss: 46,000

Silver has support around 45200 and below that level; we may see selling pressure getting intensified. With coronavirus being declared a pandemic by WHO, industrial metal demand will decrease and that is why silver is underperforming gold. Silver has seen cross below of 20 and 50 EMA moving average and RSI_14 is below 50. So clearly the trend is on the shorter side and it needs to clear its support for fresh selling. So sell below 45200 for target of 44000 and stoploss of 46000 closing basis.

Sell Aluminum | TGT 132 | Stoploss 139

Aluminum on the daily scale has seen 20 and 50 EMA crossover. ‘Bearish belt hold’ candlestick was also witnessed giving further validation of its weak trend. Lower high accompanied by RSI_14 trading below 50 gives us clear view to short aluminum with target of 132 and stoploss of 139.

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Disclaimer: The author is a Sr. Technical Analyst (Commodities) at Tradebulls Securities. Views are his own.