Trading strategies for Aluminium and Natural Gas by Tradebulls Securities

Natural Gas has breached its previous resistance of 163

Gold is making fresh all-time high both in COMEX and MCX. The rally is not stopping with gold becoming the most popular asset after Silver. Attitude towards gold and silver has changed amid Covid crisis and an extremely easy monetary policy. Precious metals are considered more safe than fiat currencies. The latest move above $2,000 an ounce was supported by weaker US dollar and somewhat disappointing economic numbers out of the US. Now, the next target for gold is $3,000 and for silver it is $29-$30. Factors which could further push up prices would be unprecedented monetary stimulus, possible asset bubbles, and difficult-to-control inflation. Gold and silver are rallying with equity market and we believe there is overdue correction in both the asset class. However, we urge investors to be cautious at current levels as the rally is very much over extended. Fundamentally, we remain bullish long-term in both gold and silver, but, in the short term, we would like to take profit off the table and wait for any dip before venturing out to buy. Silver-backed exchange (ETF) rose to a record 8,445 tonnes this year. This is almost double the previous record in set 2009. Gold/Silver ratio is at 75.44 and has broken the long-term trendline of 90, showing silver is outperforming gold and if this trend continues, there is more potential for silver to go high.

Crude oil jumped 4 per cent to highest in five months as EIA reported drop in crude oil inventory. Prices have breached 3,200 levels but, once again, the prices after breaching 3,200 have retraced back below that level. China’s crude oil imports dropped from record high as prices have increased and there seems to be lack of positive cues for crude oil as rebound in cases of Covid is expected to put pressure on demand. On the supply side, we might see positive development as most of the world’s reserve will vanish by early next year.

Natural Gas has rallied strongly and market continues to grind higher. The level of $2.00 should provide significant support now that NG has broken out of consolidation area. Tropical storm is threatening natural gas production in the US so we could see prices rallying higher. Natural gas has suddenly turned into a “buy on the dips” type of marketplace. In the long-term, I think, we are going to try to get to the $3.00 level.

Recommendations

Buy Aluminum | TGT: 150 | Stoploss 142

Aluminum, along with all base metals, is trading in an overbought territory but does not look overstretched compared to other base metals. There is no reversal pattern on the daily scale; so, we are suggesting going long in Aluminum. After breaching its previous resistance of 143, prices have galloped in short time till 147. We would recommend going long near 146 for the target of 150 with a stoploss of 142

Buy Natural Gas | TGT: 172 | Stoploss 158

Natural Gas (NG) has breached its previous resistance of 163 so we are bullish on the counter. Like every other commodity, NG is in overbought zone as RSI_14 is at 70 but again underlying trend is bullish with no sign of reversal. We would recommend going long near 162 with target of 172 and stoploss of 158 on a closing basis.

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