Trading strategies for gold and crude oil by Tradebulls Securities

Range breakout for gold comes above 45,300

The market sentiment is shifting towards equities and the credibility issue of Turkey has been the primary reason for the gold to move lower on Tuesday. Despite the US dollar trading down and the US 10-year yields declining from the highs, gold still managed to trade lower indicating that the reason for decline is portfolio balancing. In the first nine months of 2020, Gold ETF inflows were nothing short of staggering and in 2021, ETF flows have reversed with outflows around 112 tons while prices have dropped by $200. So, outflows are also having greater impact on prices on the way down.

On technical basis, prices in COMEX are in neutral territory as gold is finding support around its 10($1,731) and 20($1,734) day moving average in COMEX while in MCX, prices are in negative territory thanks to a strong Rupee as gold is trading below 20 (Rs. 45,252) day moving average. Short-term resistance is around Rs. 45,300. Gold may find its feet if it manages to break above that level. Till then, we are bearish on gold with sell on rise strategy with 44,200 as expected downside target. Only above Rs 45,300, are we bullish and would recommend long position.

Recovery in US Dollar have dented the shine in Silver, which is now trading below $26 and looking bearish. Unless, it crosses the confluence of 50-day SMA and a short-term resistance line near $26.40, silver buyers shouldn’t return to the desk. Silver appears to be trading within a neutral Symmetrical Triangle chart pattern.  Any break below $25 leaves level for $24.80 - $24.40 level exposed. Silver needs to break $26 level for bulls to make their case.

Crude oil prices tumbled over 3.5 per cent, on Tuesday, after concerns over new pandemic curbs and slow vaccine rollouts in Europe as well as a stronger dollar. Another reason for the drop in crude oil prices was the build in crude oil inventories according to API US data. Market is adjusting to the new curbs announced in Europe and that has hampered the demand recovery scenario. It will be intresting to see if OPEC+ will continue its production cut in April or not. If they will continue to hold their production cut then we may see oil prices recovering. After Tuesday's sharp fall, we are expecting some bounce back from current levels.

Natural Gas witnessed sell-off on Tuesday and it is only a time before we again will get opportunity to sell on rise. After all, temperatures in the United States and Europe are going to continue to climb, and that, of course, should drive down demand for natural gas overall. The 50-day moving average is placed around $2.70 region, where we anticipate bit of resistance and selling pressure. We could go around $2.25 to test the support level. So area around 186 would be good opportunity for sell with stoploss of 190 and target of 175.

Recommendations

Buy Gold above 45,300 | TGT: 45,800 | Stoploss: 45,000

Gold has been in oversold region and consolidating in the range of 44,200-45,300. Range breakout comes above 45,300 and 20 DMA also comes around that area. So resistance for gold comes around 45,300 and we are recommending long only above that level. Till then the trend is weak. So buy above 45,300 with stoploss of 45,000 on a closing basis.

Sell Crude below 4,200 | TGT: 4,050 | Stoploss: 4,320

Crude has made ‘Bearish Belt Hold’ candlestick pattern on daily scale. The RSI_14 is around 40, so the trend is negative and prices have come below its 50-DMA. All points to breakdown but we will wait for break below 4,200 where there is support. So sell below 4,200 for expected target of 4,050 and stoploss of 4,320.

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