Commodity outlook and top trading ideas by Tradebulls for today

Commodity outlook and trading ideas by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls:

Dollar index is witnessing much needed pullback from 95 levels. 29th May was also the 11th day up from the last main bottom. This puts the index in the window of time for a closing price reversal top. A rally of this size and duration often ends with a dramatic closing price reversal top. The reason behind rally in DXY was the political scenario in Italy where chances are high of re-election. Investors are spooked with the results and Italian Yield has jumped considerably owing to fear of sovereign default. Euro yesterday rebounded from 10 month low as report media suggested Italy’s Center and Right parties might try to iron out their differences and form government.  DXY Future has also broken the trendline from 17th May so we may see the downside get extended till 93 where it has cluster of supports. USDINR Future has support at 67.48 and any breakdown below that level may propel our currency to strengthen further till 67.20. However if USDINR sustains above 67.48, then expect prices to weaken further till 68.

Gold Speculators drop bullish bets for 2nd week, down 4 out of last 5 weeks, this is positive as gold is not overcrowded with bulls. 10 Yr US Treasury Yield fell from 3.127 to 2.769 from 19th May to 29th May.  This number may look small but its 11% decrease.  This is the reason why gold is rising despite increase in US Dollar. Bullish sentiment currently sits at just below 30% bulls and near the same levels as July 2017 and mid-December 2017. The price action does not indicate any pessimism or fear. Gold is hovering near $1300 and has strong support at $1280 and minor resistance at $1326. In Rupee term, gold is looking strong thanks to weak INR. Any short term trend reversal in MCX may only come below 31100.

Crude Oil market recovered smartly yesterday after last week’s correction on news of OPEC’s oil supply normalization. The cartel and its Russian ally seem to take seriously the recent warning that $70 or higher barrel price could further curb oil demand and thus economic growth. The recent correction was needed if crude wants to trade again above $80 as the long position was getting overcrowded. The recent correction has shaken off some of the bulls.  We don’t expect crude to correct majorly as long as $74 is not broken in NYMEX.

Buy Gold

Target: Rs 31,750 

Stoploss: Rs 30,950

Gold is trading above the up trendline taken from the lows of 29521 to 30278. Multiple times the prices have taken support at the trendline and prices have bounced back validating the importance of trendline. The Oscillator RSI_14 is trading near midpoint of the range and there is no divergence indicating the trend to continue. Short term moving average are tightly packed together since gold is trading in range which again is indication that range breakout is imminent. We recommend creating long position with target of 31750 and stop loss of 30950

Sell Lead

Target: Rs 160

Stoploss: Rs 169

On Weekly scale, Lead has faced resistance at 172.55 and has made double top. On Daily scale, lead is making lower high which is prime indication of sellers dragging the commodity lower. The Oscillator has been in overbought zone and now is trading at 60. It has made evening star candlestick pattern and averages are curving downwards.  The retracement level of 61.8% comes at 164 taken from high of 172.6 and low of 150.60. Prices still are away from all important moving average so we expect price and average to converge. Lead is recommend to go short with target of 160 and stop loss of 169

Buy Nickel

Target: Rs 1,050

Stoploss: Rs 998

Nickel has been trending nicely on both daily and weekly chart. After trading in consolidation, once again it has broken out of the range with good volumes.  Moving average crossover has already generated buy signal and any trend reversal may only come below 998. Nickel is taking support at short term 13 day moving average since past 5 trading session. We recommend creating long position with target of 1050 and stop loss of 998 closing basis.

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