Commodity outlook by Tradebulls Securities: Buy lead, natural gas

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

Indian rupee has strengthened against the US dollar for 7 days on the trot. The latest decline takes the price to the lowest levels in more than a month, mainly driven by the ongoing strength in the Indian rupee. Price is trading below 50 and 20 day moving average so there is bearish bias in the medium term. Below 71, there is room till 70.50 till 70.20. The trend reversal will only come above 71.30.

Gold: It’s been 5 days in a row that gold prices have fallen in negative territory. Market had already discounted news of no rate cut from the Federal Reserve, but when it stated that it will not cut any interest rate for 2020, US Dollar fell which helped gold recover but is still not out of woods. Lately, it seems as if the market is starting to price some type of an agreement between the Americans and the Chinese going forward. Gold is losing its luster with the yield curve no longer inverted and recent economic reports suggesting improving economic conditions.

Strong Indian rupee is also keeping prices under check in MCX. Although we also cannot deny that gold has strong support at $1450, it is expected to remain under pressure till Rs 38,100 is not breached in MCX or $1490 is not breached in COMEX.

Silver: Bears have regained the overall near-term technical advantage in Silver and restarted a more than three-month-old downtrend on the daily bar chart. The metal is languishing near its support of 43,400 and breach below that could open doors till 42,800. It is crucial for silver to close above 44,300 for bulls to gain any momentum on the upside. Market still looks sell on rise as long as 44,300 is not breached. In COMEX, silver needs to break above $17.

Crude oil is stuck in a narrow range and going back and forth in the intraday session making new high and low in relatively short time period giving no indication of a clear trend. Recently, crude oil prices fell sharply after US inventory reported more than expected crude oil but prices recovered swiftly and held the important support of 4,100 in MCX giving impetus that trend still is positive. Crude oil has strong resistance at $65 and if it breaches $65 then next resistance would be $67.5. Support is at 200 DMA at $63.3 and next support is at 50 DMA at $62. All things being equal, this is a market that is trying to break out but has a lot of work to do in order to make that happen.

OPEC did a bit of a production cut, but concerns about demand still cause issues. In MCX, Crude oil has resistance around 4225-4250 and support around 4100. Crude oil is expected to trade in the range of 4100-4225. Natural gas market is in full bear mode and might be a good thing for those investors who are waiting in sidelines for entry. Over the weekend, CFTC managed money net position shows the largest net short position in the last 5-years. Natural gas production remains strong; hovering above 95.0 Bcf/d. Strong production combined with a much warmer outlook over the next couple of weeks puts bears in firm control of the market. Triple-digit natural gas withdrawals not anticipated over the next few weeks after warmer trend in the forecast models over the weekend.

Recommendation:
 

Buy Lead: TGT 157 Stoploss 151.50

Lead is making rounding bottom chart pattern on the daily scale. It has taken support around 151.60 and recovered till 153. The short term moving average of 20 and 50 have given buy cross over while price action is above 200 day moving average. RSI_14 is neutral with no divergence so we recommend long positions with target of 157 and stoploss of 151.50.

Buy Natural Gas: TGT 170 Stoploss 155

Natural Gas has made double bottom at 155. The price action is near to its double bottom formation and recent steep fall indicates that we might see some sort of short covering around important support levels. Natural Gas has made ‘harami’ candlestick pattern at the support level of 156 and bounced back. So we expect this pullback to carry till 170. So buy natural gas at the current rate with an expected target of 170 and stoploss of 155 closing basis.

=====================================
Disclaimer: Views expressed are the author's own.