Commodity outlook by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls:
Commodities Outlook: The US Dollar index which was languishing below 89 jumped on hawkish Fed minutes. The Dollar index suffered 4-day losing streak and is trading around 89.40. The expectation of inflation on 12-month basis increasing in coming months have given an indication that interest rate hike could be seen sooner. However, the market is not buying the Fed’s hawkish talk as US 10 year treasury yield barely moved. US dollar is getting support from conflicts in Syria. However, the market may resume buying risk assets and selling the US dollars once the Syrian fears fade. Technically the Dollar index chart looks weak and any trend reversal can only be expected above 90.50. We are still bearish in US greenback and the bounce we are seeing right now is just technical in nature as the dollar index was trading in oversold territory.
Gold broke the short-term resistance of $1345 but the medium term resistance of $1365 proved once again its nemesis. In wake of Trump’s missile threat, gold got the much-needed boost to break out of its $1345-1320 range but again stopped at $1365. Since starting of 2018, $1365 has proven to be strong resistance and we feel that next leg up for gold will only come if gold happens to jump above that level. Gold in MCX has been making a higher top and higher bottom indicating a bullish trend. The support of 30500 has shifted now to 30900. We are bullish on gold but would avoid advocating long position in silver owing to weak technical chart. Silver is trading sideways and we foresee any upside only above 39600.
Crude Oil is trading at highest since Dec 2014. Brent Crude has managed to break $71 in NYMEX. The Syria conflict overshadowed expanding US crude oil production and inventories. Market ignored the higher than expected US crude oil inventory which shows bulls are totally in control and disregarding any negative crude oil news. As long as the tension is not abated, we don’t see crude oil price retracing. Near term support for crude in MCX is at 4300 and 4180. The momentum indicator is showing some negative divergence so short term we may expect some cool off in prices although the trend remains positive in medium term. 4500 is the next resistance for Crude and traders are recommended to stay long as long as 4240 is not breached on closing basis.
Target: Rs 158
Stoploss: Rs 152.50
Symmetrical triangle pattern can be seen in daily chart in Lead. The prices have bounced after taking support at the uptrend-line. The emergence of hammer candle stick pattern near the support zone also indicates short term trend reversal. The range is getting narrower so we can expect range breakout in near term. We expect resistance near 158 which is where 200 day moving average is. We recommend taking long position in Lead with target of 158 and stop loss of 152.50
Target: Rs 142
Stoploss: Rs 149
Aluminum is classic case of running too fast in too little time. The gain of 16% in 3 trading session is something which Aluminum in its history has never done. Also we can see harami candlestick pattern at the top which generally suggest that buying has been exhausted and we can expect correction or sideways consolidation in near term. The oscillator RSI_14 is in overbought territory which again confirms that holding long is unattractive with risk reward ratio. So we recommend creating short position in Aluminum with target of 142 and stop loss of 149 closing basis.
Disclaimer: The analyst may have positions in any or all the stocks mentioned above.