Trading strategies for Lead and Natural Gas by Tradebulls Securities

The rally for precious metals has cooled somewhat since minutes from the Federal Open Market Committee’s meeting in late July signaled that the policy-setting group was unwilling to use unconventional methods to keep benchmark interest rates lower, which was viewed as a short-term negative for gold. Gold and silver have slipped as we have seen marginal liquidation of speculative longs and easing of tension between the US and China. The 50-day EMA comes at $1,897 and any closing below that would certainly give bears an edge and we might see gold slipping till $1,860. In MCX, we might see gold slipping till Rs. 50,600-50,400. In medium-term, gold still looks positive because of the risks to the global economic outlook and election uncertainty. Any further dip below Rs 50,000 will be a good opportunity to accumulate gold.

After five consecutive months of gains, silver has stumbled into a key level of Fibonacci support, diminishing the hopes of a bullish continuation. The retracement taken from 41,000 to 77,950, silver is at 61.8 per cent which comes to 63,800. Below that, silver can come till 50 per cent retracement i.e. 59,475. The RSI, which was above 50 since May when prices was around 41,000, has come under 50 stating loss of momentum.

Oil prices gained after higher-than-expected crude draw from the US, according to API, and tighter supply from the US Gulf Coast as Tropical Storm Laura was forecast to become a major hurricane. Oil prices have failed to gain any real traction over the past month due to grim forecasts of subdued future oil demand in the coming months. The trend is higher with higher low but overall crude is still trading in range with every dips getting bought into but failing to see any follow up.

Price of Natural Gas has increased as two incoming storms have resulted in a material shut-in in the Gulf of Mexico. But supplies dropped first before demand is felt, and so price have jumped because of this mismatch. We might see prices falling after storm passes, but till then, expect prices to remain higher.

Recommendation:
 

Sell Lead | TGT:150.80 | Stop loss: 159

Lead has made narrow-bodied candles around 158-159 zone, indicating that distribution is taking place around that zone. RSI_14 already had given negative divergence on daily scale and ADX has turned from 50 showing that the momentum is fading. We recommend going short with stoploss of 159 and expected target of 150.80.

Buy Natural Gas | TGT: 200 | Stop loss: 182

Natural Gas is trading at 6-month high and fundamentals are pushing the prices up due to mismatch of demand and supply from the oncoming storm in Gulf of Mexico. Since the start of August, Natural Gas has taken support at its 5-day EMA and any loss in momentum may only come if it closes below it. We recommend taking long position with stoploss of 182 and expected target of 200.
Disclaimer: Bhavik Patel is Sr. Technical Analyst (Commodities) at Tradebulls Securities. Views are personal.