Outlook on Crude oil, natural gas by Bhavik Patel of Tradebulls Securities

Crude oil bulls look exhausted

Expectation from the US Fed meet was very low and the event passed without any fanfare as the Fed sang the same tune that interest rates are expected to remain low and Covid-19 is making economy vulnerable. Bargain hunting once again was evident as Gold bulls stepped in around $1,905 when gold fell from $1,934 to $1,905 in relative short period and then gold recovered back to $1,950. Gold continues to look positive although we expect some profit booking at current levels but overall fundamentals remain bullish because of the rise in Covid-19 infections and new shutdowns, depreciating the US Dollar, increasing tension between the US and China, pending US stimulus package of $1 trillion and surge in gold ETFs. We continue to advocate to remain long in gold until Rs 51,500 is not taken out.

Silver prices recovered 100 per cent after crashing from $24.50 to $22.20. It is now trading around $23.40. There is extreme volatility as prices have rallied in relative short time so we would recommend intraday traders or short-term traders to avoid taking any positions looking at recent price movement. On daily scale, silver is looking extremely overbought, so, some money should be taken off the table and wait for silver to come around Rs 58,000 for taking fresh long positions.

Crude has good support around levels of 3,030-2,980 and resistance in zone of 3,130-3,180. Crude is trading in this narrow range since the past 10 days. Delays in the next stimulus bill is expected to have negative effect on oil markets as it would mean less money in hands of consumers who can spend. Old production quota of OPEC is about to expire at the end of this month and upcoming partial return of curtailed OPEC+ production cut may create glut of around 170 million barrels. Either wait for breakout above 3,200 or breakdown below 3,000 to take any fresh call.

Natural Gas has managed to stay in tight range most of this summer. Buying emerges from lower levels but is not sustaining at higher levels. Natural Gas is trading in symmetrical triangle pattern and breakout comes above 145 in MCX. Fundamentally, the bearish headwinds (LNG and return of shut-in production) are disappearing. The current natural gas rally was triggered on Thursday by a modest storage injection which eased containment concerns and overshadowed worries imposed by the ongoing coronavirus pandemic.

Sell Crude Oil below 2,980 | TGT: Rs 2,850 | Stop loss: Rs 3,080

As stated earlier, crude oil is trading in narrow range with make or break above 3,100 or below 3,000. The 20-EMA is converging near price and we may see more downside once 2,980 is breached. RSI_14 is also showing loss in strength and ADX, too, is concurring the same -- that bulls are looking exhausted. We are waiting for 2,980 to be breached for floodgates to open; so, we recommend short below 2,980 for expected target of 2,850 and stoploss of 3,080.

Buy Natural Gas above Rs 145 | TGT: Rs 150 | Stoploss: Rs 142

Natural Gas is trading in a symmetrical triangle pattern with breakout above 145. Its 200 EMA also comes around 145 which is strong resistance. Once, Natural Gas surpasses that level, the next resistance comes at around 149-150. RSI_14 is trading above 55 so the trend is positive. We recommend going long above 145 for the expected target of 150 and stoploss of 142 on a closing basis.
Disclaimer: Bhavik Patel is Sr. Technical Analyst (Commodities) at Tradebulls Securities. Views are personal.