Trading strategies for copper and nickel by Tradebulls Securities

For Copper sellers to gain upperhand, they must breach the support of 668 levels

Hedge funds continue to dump gold as CFTC report shows money managers decreased their speculative gross long positions in Comex gold futures by 10,385 contracts to 96,223. Gold’s net length is at its lowest point since May 2019 and such low net long positions are in order to reduce risk of further slide in prices as weak hands are already out of the market. Signs are that gold has found bottom after streak of successive weakly loss. In Comex, gold is unable to break $1,680. ETF outflows are also starting to stablize as Friday saw outflows of only 1.6 tons, the lowest daily figure in four weeks.  We believe that in short term, we may see some attempt by bulls to take gold above $1750. In MCX, we are expecting prices of 45,500 this week and any fresh selling will only come below 44,000.

The fact that the Federal Reserve is willing to let inflation run hotter than its former mandate provides a bullish tailwind for the precious metals. The recent fiscal stimulus package is expected to be positive for precious metals too. Silver bulls' next upside price objective is closing prices above solid technical resistance at $27.50 an ounce while in MCX it would be Rs 68,100. In short term, there are some signs that selling has subsided and we might see bottom forming around 65,200. Any fresh selling is expected below 65,000 levels.

Crude oil prices have retraced from the highs. Prices were pressured by expectations that last month's winter storm in Texas could keep boosting crude inventories. Over the next couple of years, we might see crude prices remain high as US President Joe Biden has started putting his green plan in action which will benefit oil industries, not the US, but OPEC+ oil industries. In short term, even though prices have retraced, we are not expecting very deep correction but more of shallow correction as OPEC+ bets are paying off with US Airlines rebounding as the number of people taking flights has climbed to the highest level since the pandemic began. 46,00 is immediate support for crude and any further weakness may only come below that level.

Natural Gas rallied on Tuesday but is still below the 200 DMA. Prices have bounced from $2.50 level and it would be matter of time before exhaustion again starts showing on chart.$2.70 level will be very difficult to get above, and of course we have to worry about the massive amount of supply that will continues to weigh on the markets. The weather is expected to be warmer than normal throughout most of the east coast and the mid-west for the next 8-14 days. This should weigh negatively on heating demand. We would be looking for any bounce to look for short opportunity.

Recommendations

Sell Copper below 667 | TGT: 658 | Stoploss 676

After ‘Bearish belt hold’ candlestick formation, copper is trading sideways but has support around 668 levels. For sellers to gain upperhand, they must breach this support. Short term trend has turned to bearish as prices are trading below 20-DMA, but  above 50-DMA, showing that the medium term trend is neutral. So we would recommend short below 667 for expected target of 658 and stoploss of 676 on a closing basis.

Sell Nickel below 1,145 | TGT 1,105 | Stoploss 1,170

NIckel has taken support around 1,148 twice in a week. It is trading in a narrow range of 1,148-1,184. For further confirmation of trend, it either needs to breach 1,184 on the upside or break 1,148 on the downside. So, we would recommend to short only below 1,145 with stoploss of 1,170 on a closing basis and for expected target of 1,105.

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