Trading strategies for copper and lead by Tradebulls Securities

Negative divergence (RSI_14) on daily scale is being seen in Copper since July-end

As the risk tone recovers, gold prices have pulled back from its high of $1,976. FOMC’s upwardly revised economic forecasts and hints of no immediate need to act pushed the greenback and pulled equity and gold down. We don’t expect gold to remain down and slowly and steadily it will inch up towards $1,976. Now, covid vaccine development will be the next catalyst for bullions.

Silver has failed to cross 70,000 in MCX since August. Every time it falls after testing levels of 69,800-69,900, thus finding resistance around that levels. We are more bullish in gold than silver and we might see more upside in silver if volatility increases. As history has shown, low volatility is friend of silver bears than bulls. 66,000 is immediate support and fall below that, we might see silver tumbling to 65,000 to 64,500.

Crude oil saw some big crash last week as OPEC has cut demand outlook but has since recovered and managed to sustain above $41. The positive news for crude markets this week could come from OPEC and partners, which are set to meet on Thursday. The cartel is unlikely to make deeper output cuts, but strong compliance and compensation for the missed target could offer some support to the markets. Additionally, Hurricane Sally which impacted close to 25 per cent of crude production of US has also given some tailwinds to crude oil. After a few months of quick demand recovery, the International Energy Agency now sees headwinds for further recovery of crude demand. So, we expect crude to find resistance around 3,050-3,100. The undertone till OPEC+ meeting is bullish.

In Natural Gas, for now, the weather remains bearish 10-15 days out, so we won't take a position unless we see supportive weather and sub-88 Bcf/d production. Natural gas prices got a nice boost yesterday right off of the support area with Lower 48 production coming in ~1.6 Bcf/d lower versus the last weekend.  Any serious correction is expected below 166 and we may see levels till 155. Trend reversal is only possible above 190.

Recommendations
 

Sell Copper | Target: Rs 512 | Stop loss: Rs 535

On the daily scale, Copper is positive. So, this will be contrarian call, but we are seeing negative divergence (RSI_14) on daily scale in Copper since July-end. Also, since August, Copper has failed to move above 534 levels and every time succumbs to selling pressure till 515 after touching levels of 534. Currently copper is sitting at the top end of the range around 528-530, so, we are recommending short with possible target of 512 and stoploss of 535 on a closing basis.

Sell Lead | Target: Rs 144 | Stop loss: Rs 153

Lead has made ‘Dark Cloud Cover’ candlestick pattern and has witnessed sell off after occurrence of the pattern. Momentum oscillator RSI_14 is in negative territory as it is trading under 40. Prices are also under 20 and 50 EMA thus validating bearish trend. We recommend short position with expected target of 144 and stoploss of 153.
Disclaimer: Bhavik Patel is Sr. Technical Analyst (Commodities) at Tradebulls Securities. Views are personal.