Trading strategies for crude oil and zinc by Tradebulls Securities

Gold saw its first monthly decline after five positive months. The rise in ISM Manufacturing sentiment has kept gold prices in check and also US Dollar bouncing from oversold levels has given headwinds to gold. On daily chart, gold has immediate support around its 10-day SMA, currently at $1,949. A violation there would expose the 50-day SMA located just below $1,900. On the higher side, $2,000 is the level to beat for the bulls. We might get more direction after Non-Farm payroll data from US this Friday. Till then, expect gold to trade in $50 range. Near-term support in MCX comes at 50,500 while 52,200 is near term resistance.

Retail trader in Silver shows net-long with the ratio of traders long to short at 5.76 to 1.We are in contrarian view, so this much long position will create headwinds for silver on the way up. Silver volatility was trading at 59.65, sitting closer to the monthly low (52.83) than the monthly high (83.31). Falling silver volatility is not necessarily a negative development for silver prices, whereas rising silver volatility has almost always proved bullish. So, we might see silver trading sideways to negative at least till NFP data from US comes. Silver medium-term bull trend is likely to continue till it is above its recent swing low of $26. In MCX, the level comes to 65900.

Crude oil had broken its range of 3,130-3,230 where it was stuck in since August 10. Russia’s decision to talk with OPEC+ regarding production cuts as demand has increased have given the markets jitters. Any violation below 3,100 will open floodgates till 2,800. Any positive development regarding shut down of refineries due to hurricane have been factored by the market.

Near-term fundamentals are bearish for Natural Gas as cooling days have started to fall and cash is below futures. But, upcoming winter season might be different as thanks to fallen production, inventory will be less than in 2018. Export capacity has increased so in September-end, we might see more export from US to Mexico which will push inventory low and prices higher. So near-term, we may see pullback but, in coming months, we are bullish. Below 182, we can see prices falling till 177-175, so any long position should be exited below 182.

Recommendations

Sell Crude oil | TGT: 2,800 | Stop loss: 3,200

Crude oil has breached its range of 3,130-3,230 with volumes. Range breakdown is confirmed as price is below 50 DMA, something not seen since May 2020. RSI_14 is below 50 which again confirms bearish nature of crude. We expect crude oil to test 2,800 levels, so we recommend short with expected target of 2,800 and stoploss of 3,200 on a closing basis.

Sell Zinc | TGT: 190 | Stoploss: 199.50

Zinc has made ‘Bearish belt hold’ candlestick formation at the top end of the range. There is negative divergence on daily scale in RSI_14 which again suggests loss of momentum on the upside. Zinc has been taking support at its 20 DMA since April 2020 and, currently, 20 DMA comes around 192-191. We expect Zinc to again test the support of its 20-DMA, so we are recommending short with target of 190 and stoploss of 199.50

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