Outlook & trading strategies for Copper, Silver by Tradebulls Securities

The Indian rupee mirrored positive sentiment from equity market and gained for the fourth straight day on Thursday, its longest winning streak in two months. Last week was the best weekly performance from the Rupee since December 2018. 77.50 was the resistance that Rupee failed to scale and has now retraced back to 75.50 levels. A 50 per cent retracement from the recent move from the lows of 72 to high of 77.50 comes at 74.80, so we expect the Rupee to test those levels. The range of 74.50-74.20 has a good amount of support. The pullback has been sharp and with each downside, chances of profit booking increases as historically such rapid pullback have failed to sustain for longer period of time. Strength in the Indian rupee will come under threat above 76.20 levels.

Gold spot price has recovered above $1,700 after making 1 week low of around $1,690. The news of partial lift from lockdown and economies opening in many countries have made investors switch to risk-on mode so we saw profit booking in bullions while gains in the equity market. Any dips in gold should be bought up pretty quickly as countries are bailing out entire industries. Interest rates are at near nothing. That’s not going away anytime soon which will be beneficial for gold. Any long position should be exited below $1,690 or below 45,000 in MCX.

Silver markets initially pulled back from lows of $14.90 and found the $15 level to be supportive. Silver Speculative longs fall near nine month low. Sentiment wise, silver is bearish and supply/demand overhang is also keeping the prices under pressure. On the hourly chart, it is making a symmetrical triangle pattern with no clear direction. Above 43,300, we could see breakout while below 41,500, we could see a breakdown. Silver is stuck in a range of 41,500-43,200.

As deadline for production cuts approaches, OPEC is pumping its heart out as Crude oil supply from OPEC members have soared by more than 2 million bpd in April to the highest levels since December 2018. Oil trade will remain volatile, but any major relief rallies will likely be heavily sold into until the entire energy space starts delivering deeper production cuts. Open interest in the June 2020 contract fell by 44 per cent over the course of last week which means that going forward, the current contract would become illiquid and volatile. We would recommend traders to opt for next month contract for carrying any overnight positions and rollover their current contract to next contract. Till last week, we had 70 billion cubic feet storage. In May, we expect 90 to 91 Bcf/d.

Natural gas has risen while oil has fallen. Inventories are 63 per cent above last year, and 20.5 per cent higher than the five-year average for this time of the year. Natural gas has made a double bottom at 135.60 while it has strong resistance near 152-153. Since it's in a narrow range, we would only recommend sell below 145 for the target of 140 and stoploss of 148 or buy above 152 for the target of 158 and stoploss of 148.
 

Buy Silver above 43,300 | TGT: 44,500 | Stoploss 42,500

Silver on the hourly chart is trading in a symmetrical triangle pattern with a breakout above 43,300 and breakdown below 42,200. On the hourly chart, we have also seen a crossover of 20 and 50 EMA and prices have taken support at 50 EMA and bounced back. RSI is quoting at 56 which is also a positive sign but we would advice to take a position above the breakout of symmetrical triangle i.e. above 43,300. So, go long above the recommended level for expected levels of 44,500 and stoploss of 42,500 on a closing basis.

Sell Copper at 411 | TGT: 406 | Stoploss: 415

Copper on the daily scale has made ‘evening star’ candlestick pattern and the pattern will invalidate above 412. RSI is flattening since the past four trading sessions and price action is also near 411 but failing to scale new highs. This means that sellers are holding the fort around 411 and distribution is taking place. Above 414-415, we may see short-covering so any short position should be exited around those levels. Sell at 411 for expected target till 406 and stoploss of 415 on a closing basis.

Disclaimer: Bhavik Patel is Sr. Technical Analyst (Commodities) at Tradebulls Securities. Views are personal.