Trading strategies for copper and zinc by Bhavik Patel of Tradebulls Sec

Copper is already trading above its important moving average of 20 and 50 DMA but the breakout from the range has given new direction to Copper

Gold buyers are finally extending their control above $1900, rejoicing the renewed optimism over the US fiscal stimulus. There were news of stimulus deal getting clinched before Nov election which saw increase in all asset class and market coming into risk-on mode. Markets remain hopeful that the stimulus deal will be clinched ahead of the November election and the new funds will boost the demand for gold as an inflation hedge. Gold needs to break $1930 while support comes at $1882. In the short-term, the uncertainity of stimulus, US Presidential election, and strong US dollar is keeping price under check. The recent price set back is likely to be short lived.

Silver has started this week on strong note. It breached its short-term resistance at 63,300 but still needs to break 64,200. 60,000-59,500 seems to be good support now. The US Dollar Index will continue to be a major influence on this market, so we should pay attention to what is going on with the greenback. The correlation of Silver and US Dollar is -0.9 meaning it is trading in almost perfect opposite polarity.

Brent crude is likely to trade in range of $38-$45 until Nov 3 election. We saw some recovery in oil prices as OPEC gave statement that OPEC+ will remain flexible and won't ease production cuts in January till decision does not come in Nov30/Dec 1 meeting. We have to see that oil prices are not going into sell off mode despite fresh lockdown in Europe and expectation of second wave in coming winter. So downside seems limited to $36-$34 while upside remains capped till $46-$50.

Market participants have started ignoring near term bearish outlook and looking at incoming supply driven deficit. Even though cash market is weak and early Nov forecast isn't something bulls will cheer, year end we might see total net divergence of as much as 11 Bcf/d between supply and demand. The annual store surplus is likely to disappear by the end of the year. The immediate resistance is 215-216 and above that next resistance comes around 224.

Recommendation:

Buy Copper | TGT: 550 | Stoploss: 525

Copper, which was trading in range of 510-532, has given breakout. It is already trading above its important moving average of 20 and 50 DMA but the breakout from the range has given new direction to Copper. Momentum oscillator RSI_14 is trading at 60 with no divergence on daily scale. So we recommend long position with expected target of 550 and stoploss of 525

Buy Zinc | TGT: 207 | Stoploss: 195

We had recommended zinc and Nickel long last week and now it has given fresh 52 week breakout above 198. Since 182, the trend is positive as we are seeing higher high and higher low formation. The immediate support is at 194 which comes at 50 DMA. RSI_14 is at 63 so clearly there is more room on the upside. ADX momentum indicator also is around 60 indicating bullish trend. So we again this week recommend going long with expected target of 207 and stoploss of 195.

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