Outlook & trading strategies for Copper, Silver by Tradebulls Securities

Commodities Outlook & Stock recommendation by Bhavik Patel - Sr. Technical Analyst

The Union Budget and RBI policy will drive the theme for the Rupee going forward. Indian rupee is under pressure as US dollar is trading at 1-month high on the back of strong US retail sales, manufacturing activity and pick-up in housing starts. Due to an unexpected shortfall in revenue and higher spending, the fiscal deficit for the current financial year is likely to edge higher at 3.7-4 per cent which will put our Rupee under pressure. In the last couple of trading sessions, equity markets are edging higher but Indian rupee continues to slide as the market is expecting fiscal slippage around 3.7 per cent. We expect the Rupee to test levels of 71.50-71.60 in the near term.

Gold once again has taken support at $1,530 and recovered from there, making a temporary bottom. There are a number of strong drivers supporting gold prices this year, including geopolitical and trade tensions, high global debt and dovish central banks. Gold is still lagging compared to equities. The key support levels to watch are $1,545 in April gold COMEX. As long as gold maintains these levels or higher, we will be playing the market to the long side. Gold can test levels till 40,300 and 40,500 which are 50 per cent and 61.8 per cent retracement of the recent fall from 41,293 to 39,262. Any long position should be exited below 39,800 levels. Silver has support at 45,800 and yesterday intraday it breached that level briefly but bounced back. Gold is looking more strong than silver and any long position can be exited closing below 45,800. Upside seems capped till 46,500.

Crude oil is confined in a range of 3,980-4,200. We saw some spike in crude oil prices on account of Libya and Iraq uncertainty but again prices have corrected on account of weak global growth by IMF and new virus from China which raised fears of an economic slowdown. The recent swing high of crude is 4,225 and if crude breaks above that level, then only expect buying momentum till 4,300 levels. Selling will intensify below 4,000 levels and we are neutral at the moment since crude oil is confined in 150 points range. The weather has been warm and keeping pressure on natural gas prices. Another small inventory withdrawal for this time of the year is keeping bears' position strong. Stocks will go into the injection season way above last year’s level. Natural Gas is trading below $2 a level not seen since 2016. An oversold market could experience a rally but it could be short lived.

Sell Copper | TGT: Rs 445 | Stoploss: Rs 462

Copper has made a double top at 460 on September 13 and January 14. The level of 462 has not been breached since July 16. In the span of seven months, Copper has thrice unsuccessfully tried to breach 460-461 levels. Clearly, trend breakout comes above 462 and chart pattern suggests selling pressure coming around 460 levels. There is no divergence in RSI_14 on a daily scale so we recommend sell with expected move till 445 and stoploss of 462 closing basis

Sell Silver below Rs 45,800 | TGT: Rs 44,700 | Stoploss: Rs 46,500

Silver has a strong support at 45,800 as it is a recent swing low and 50-day moving average also comes near that level. RSI_14 is below 50 at 47 so trend is bearish but confirm breakdown is expected below 45,800 as level has been respected twice in the space of eight trading sessions, indicating buyers' accumulating around that level. Once sellers overtake buyers and push below that level, we may see more longs unwinding and so we recommend short below 45,800 for expected downfall till 44,700. Stoploss should be maintained at 46,500 on a closing basis.