Commodity outlook by Tradebulls Securities: Buy Crude oil, Nickel

Commodity outlook and stock recommendation by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls Securities

Rupee: The Indian currency had been in downward trajectory since the Finance Minister, Nirmala Sitharaman, announced a corporation tax rate cut bringing us at par with other Asian countries. This will bring foreign investment and so our currency got appreciated. Now Indian rupee has bottomed out around Rs 71/ US dollar and not sustaining below 70.80 inspite of strong equity market.

Partly, the reason might be a jump in the Indian bond yields which is capping Indian rupee’s gain. Previously also we have seen that whenever a currency closes below 50 day moving average, we see more than 1 per cent strength. So, Rs 70.50 is quite crucial for the rupee. For INR to further appreciate against the dollar, it needs to close below Rs 70.50 which are both retracement level and moving average. If it fails to close below that level, we may again see rupee approaching Rs 72 levels soon. Any breach below Rs 70.50 will see rupee testing levels of Rs 69.80.

Metals: Precious metals speculators raised their Gold bullish positions higher after a sharp pullback last week. Demand for the Gold calls (bullish bets) has hit the highest since November 2009. Whenever, on the daily chart, Gold trades above 15 days moving average, we get to see good rally and recently gold has closed above 15 days moving average at $1,503. So only below closing $1,508 can gold see any correction as currently 15 days EMA comes at $1,508. For us, gold next resistance is at $1,548. Only a close below $1,508 will push gold till $1,484. In MCX, Short term selling pressure may come below 37,440 as twice it has bounced back from that level and near term resistance is at 38,500-38,700.

Crude: Brent crude is expected to trade in a range of $60.50-$66. After all the excitement, crude oil prices have stabilized. Now next trigger would be US inventory. US is ready to supply oil from its strategic reserves and Saudi has said they will put 100 per cent production online in a month, so there is no bullish news for crude. Supply side is taken care of and demand side is again favoring bears as Europe’s PMI have stoked fears of recession and Trump comments over US-China trade talks have doused any optimism. The risk in Middle East has also subsided as seen in Brent-WTI spread when the attack happened, spread moved till $7.20 which has clawed back to around $5. Trend is negative in short term as even on 15 min chart, crude oil since 18th Sept is trading below 200 DMA which comes around 4150. Psychological level of 4000 and 3930 is next support for crude oil and resistance is 4150. Any upside momentum may only come above 4250.

Recommendation:

Buy Nickel

TGT: 1,290

Stoploss: 1,200

After correcting from 1300 to 1196, Nickle has again bounced back and looks a prime for further upmove. It made a hammer candlestick pattern at the recent swing low, suggesting short term bottom has been placed. The current price action is above 20 and 50 moving average. Nickel has taken support at 20DMA and has bounced from that levels and in recent correction too, has not closed below 20DMA indicating strong bullish strength in the counter. We recommend long position with expected target of 1290 and stoploss of 1200 closing basis.

Buy Crude Oil

TGT: 4,135

Stoploss: 3,940

Crude oil at has taken support at 200DMA on the daily chart and has bounced back. We saw steep correction in crude oil from 4555 to 3960. Now RSI_14 is at half level i.e. at 49.7. Some short covering is expected from this counter so keep long position light and buy with target of 4135 and stoploss of 3,940.

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Disclaimer: The author may have positions in one or all of the above mentioned stocks