Commodity outlook by Tradebulls Securities: Buy zinc, sell natural gas

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

Dollar index continues to trade near 2 years high at 98.73. Currency is chasing headline news of US-China trade war. Indian currency has less scope for appreciation as we expect DXY to trade stronger. Despite strong equity market and weak crude oil prices, currency remains subdued indicating market’s nervousness about fiscal deficit after government giving sops in the form of corporate tax cut and increase in dearness allowance of government employees. 70.50 is strong support and we expect rupee to trade in the range of 70.65-71.70 in the near term.

Gold prices saw some see-saw action where after dipping to $1475 has bounced till $1516 before again losing shine and trading near $1504. Not only is gold buoyed by the persistence of worries over the global trade outlook, but macro events are also supportive of its long-term bull market. Two factors are positive for gold; one is easing interest rates and fall in inflation-protected Treasury securities, or TIPs, and second is no progress in US-China trade talks.

Any correction in gold is only expected below 38,000 levels. Technically, it is currently taking support at 200 DMA in the hourly chart and any progress in trade talks between US and China might push gold prices to 38,150. In silver MCX, we are bullish as long as 45,000 is not breached, a low touched on 7th Oct. Since 1st Oct, it is making higher high and higher low formation so we can see a reversal is playing out after selling seen from 48,320 till 43,950. 46,150 is the 50 per cent retracement of that fall and silver is trading near that level. Once it crosses that level, we could soon see 46,660. 45,000 is the 23.6 per cent level so that level is important for maintaining a long position.

Brent: Buying emerges around $58 support level in Brent. This is a positive sign as it shows that any drops down to this level see a huge demand for the commodity. Any positive signs of trade talks could push prices up or any tension in Middle East could spike the prices. Otherwise, the sentiment is negative as the weak economy generally pushes demand down. Short term 3,680 is the stop-loss one can maintain and we could see some short covering till 3,850-3,900. Any long position can only be taken above $60.10 or 4,050. Overall trend still is bearish but we are looking for short term bounce play here.

Recommendation:

Buy Zinc

TARGET: 186

STOP LOSS: 179

Zinc has made ‘hammer’ candlestick pattern after correcting from 189 to 179. Multiple times zinc has taken support around 179 and has started trending upwards. 20 and 50 DMA has started curving upwards and RSI_14 has bounced from 40 to 47.50. We expect Zinc to test its previous swing high of 186 so we recommend going long with stoploss of recent swing low of 179 and target of 186.

Sell Natural Gas

TARGET: 155

STOP LOSS: 166

Natural Gas is trading below its short term moving average of 20 and 50 DMA. Also, it is trading below 200 DMA giving the indication that the primary trend is negative. Natural Gas has strong support around 155-152 where one can initiate long position but the current trend still shows there is room on the downside till 155. So at current juncture, sell natural gas with target of 155 and stoploss of 166.

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Disclaimer: The views expressed are the author's own. He may have positions in one or more stocks.