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Commodity outlook by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls:
Commodities Outlook: Indian Rupee looks vulnerable against US Dollar. The twin shocks of country's trade deficit hitting $13.69 billion against 10.65 billion and exports dipping after a gap of four months in March is weighing the rupee. US Dollar Index did moderately bounced back above 89 levels but the undertone still looks weak. Indian Rupee has broken out of the trading range of 65.50-64.80. We expect Indian Rupee to depreciate further till 66-66.10.
Gold once again has come to test the resistance of $1355-1360. Although the fear that gripped investment markets last week has abided, gold continues to benefit from lingering fears. It is trading at the top of its 3-month range. The interim outlook still remains favourable and we can see gold touching the highs of 31800 within coming days. Silver after being in hibernation finally has broken out. The fundamentals were bullish but technically, silver was looking weak but now with yesterday’s spectacular move, silver is looking positive. At present, silver is being considered as industrial metals and because of big upmove in base metals, we are seeing follow up in silver prices too. Technically Silver has given trend reversal with closing above its 200 days moving average. The short squeeze is being witnessed in silver as speculators were record short in the commodity.
Three primary reasons are keeping crude oil above $71 on NYMEX. First is the report of OPEC oversupply getting evaporated thanks to production decline especially from Venezuela. There is healthy demand coming from US and it is at a record level of 9.86 million barrels a day. Previously during peak summer season, the demand was at 9.8 million barrels a day. The third reason is the surprise weekly drop in inventories in US this week. As long as there is geopolitical tension in Syria, we expect crude oil prices to remain elevated. Any trend reversal may only come below 4300 in MCX.
This week the spotlight in commodity was base metal especially Aluminum and Nickel. Nickel in 2 trading session has moved 20% which is highest intraday since 2009. We put it down to a deep market fear of further sanctions from US. We continue to remain bullish in base metals although we do caution investors to remain light as volatility has increased considerably. The wild price movements may be difficult to predict for intraday traders and let sanity return to market before taking any heavy positions.
Buy Silver
Target: 41,000
Stoploss: Rs 40,000
Silver has broken out of its trading range between 39500-37900. The oscillator especially Stochastic has generated a buy signal. The moving average has curved upwards indicating a continuation of ongoing upside momentum. We expect Silver to touch 41000 before it retraces back as RSI_14 will be in the oversold region at that time. Currently, it is just a shade below oversold region. The big white candle indicates strong momentum on the daily chart and usually, we see follow up move after such a big up strong move. So we advice taking a long position with stop loss of 40000 and target at 41000.
Sell Aluminum
Target: Rs 171
Stoploss: Rs 181
Selling aluminium is a contrarian call as technically the chart still looks bullish. The price is way too stretched against moving average and generally mean revision does take place. RSI_14 is deep in oversold territory at 87. At present, the price action is on account of sanctions and worries but the prices look stretched both in the weekly and daily chart. We do advice keeping strict stop loss and light position because when there is panic buying, the market generally disregards technical and fundamental levels. So we advice short On aluminium with a strict stop loss of 181 and target at 171.
Disclaimer: The analyst may have positions in any or all the stocks mentioned above.
