Commodity outlook by Tradebulls Securities: Buy lead, sell nickel

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

Indian rupee continues to strengthen on the back of FIIs inflows. The currency is expected to test levels of 69.30-69.40. The domestic unit is nearing its oversold territory but there isn’t any divergence which suggests a reversal is imminent. So sell on the rise should be the theme until 71.40 is not breached on the upside. Clearly, there is a very slim correlation between US dollar and Indian rupee. Last week, inspite of US dollar index (DXY) reaching 52-week high, Indian rupee traded strong as we are seeing nearly Rs 4,000 crore of inflows this month. Another factor which affects rupee is crude oil which is trading stable. Any jump in crude oil prices might create headwinds.

Gold has crossed $1,300 as DXY have fallen from its 52-week high and Brexit issue is once again helping investors in switching to risk-on mode. Any long positions should be held with a stop loss of 31,800 in MCX. Bulls might give up if gold breaks $1,272 in COMEX. Meanwhile, silver rally also is verifying bullish trend in bullions. There is headroom till 32,500 in MCX before we can see gold rally getting weakened. In COMEX, both bulls and bears are on equal footing but bulls have managed to gain some upper hand as inspite of strong DXY, gold did not see that much correction.

Oil prices rose on Monday, lifted by comments from Saudi oil minister Khalid al-Falih that an end to OPEC-led supply cuts was unlikely before June and a report showing a fall US drilling activity. EIA (Energy Information Administration) reported a bullish oil storage report last week. A bullish February will cascade into a bullish March with the first week of March showing a US crude storage draw. Now that crude has broken the range of Rs 4,000-3,800, we believe crude will now test a resistance of Rs 4,150 so long positions can be added with stop loss of Rs 3,800.

Buy Lead

Target: Rs 151 

Stop loss: Rs 144

Lead on daily chart looks bullish as it has managed to make higher high and higher low formation.  RSI-14 is trading at 51 levels so it has just come in positive territory. Price action is above its 200 - day moving average (DMA) and we saw ‘harami’ candlestick formation after fall from 154.10 till 143.60, which indicates selling pressure has subsided. Cross over of 9-DMA in RSI-14 also validates the bull signal. So we are recommending a long position from the current rate for the expected target of Rs 151 and a stop loss of Rs 144 on the closing basis.

Sell Nickel 

Target: Rs 875 

Stop loss: Rs 930

Nickel is taking support at its 200-DMA but short-term moving averages have started moving south, indicating momentum on the upside is fading. RSI-14 is below 49 which is another indicator that downward momentum may continue. Rs 921 proves to be a short-term resistance as since past three trading sessions, nickel is unable to surpass that level. This indicates that the seller becomes more active near that range. We are expecting downside to test levels till Rs 875 and so we are recommending sell call with a stop loss of Rs 930 on closing basis.

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