Commodity outlook by Tradebulls Securities: Buy Crude oil, Copper

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

Yuan: The strong Yuan has set stage for Indian rupee to recover from 72.60 to sub 72. Chinese Yuan is trading at 7.14 from 7.18 on news that US-China will resume trade talks. This positive reaction along with positive lift from global equity market has propelled rupee to trade sub 72. We believe strength in rupee may be short-lived as there aren’t any positive factors for our rupee. Any positive announcement from government regarding Auto GST may help rupee trade below 71.80 but if there aren’t any fruitful announcements, expect rupee to test levels of 73.30.

Gold and Silver: Gold continues to remain strong and any pullback is opportunity for adding longs. Silver rally looks overstretched but we have seen market remaining irrational for longer period of time and so we would advice traders not to short either of precious metals. Giving boost to gold and silver are the worsening fundamental picture. It’s hard to find a macro sweet spot anywhere in the world these days, with PMIs falling everywhere, settling comfortably below the expansion/contraction 50 level. 

Major central banks continue to add gold to their reserve with RBI growing its holdings by 9.2 per cent in the year ended June buying 51.93 tonnes. Ultra easy monetary policy is pushing yields even lower and in many cases even more negative which in turn is beneficial to gold. We feel short term pullback will be nice buying opportunities and only if Gold breaches below $1502 do we see some selling pressure. We expect gold to test $1592 as soon as it breaches its immediate resistance of $1555. We would not short this market, because a market can remain much more irrational than we can remain insolvent.

Cured oil: The oil is stuck in range of $57-$62. It is not going anywhere fast. Seasonality in crude oil prices are unfriendly in September and higher than normal U.S. oil storage pressures the oil complex and ongoing trade war will keep demand in check. Crude oil is well supplied as compare to 5 year US average inventory, currently US has surplus of 3.4 per cent while in comparison to last year, US has more than 7.2 per cent more crude. Crude Oil, technically, is failing to close above 4100 and cannot sustain below 3820. It is stuck in range. On daily scale it is just trading above 200 day moving average at 3927. Bias is slightly bullish till 4000 is not breached on the downside .Any short position can be taken below 3920 till 3820 and long above 4100 till 4250.

Recommendation:

Buy Crude above 4100

Target: 4250

Stoploss 4000

As mentioned, crude oil is stuck in range of 3920-4100. Now it has come near the upper end of the range and if it manages to break the range, momentum will take it to 4250 where next resistance is. Crude oil looks mildly positive as on daily scale, it is trading above all its important short term moving average as well as 200 day moving average. Volatility is muted because of range bound action but we expect volatility to pick up once crude breaches the range so buy above 4100 for expected target of 4250 and stoploss of 4000.

Buy Copper

Target: 455

Stoploss 445

Copper made ‘bullish belt hold’ candlestick pattern which as name states is bullish in nature. RSI_14 is comfortably above 50 and short term moving average of 13 and 20 has given positive cross over.  Copper has near term resistance at 455 as in July it tried twice to surpass that level but was unsuccessful. Current momentum is positive and we expect it to test its resistance of 455 so go long with target of 455 and stoploss of 445.

=====================================

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