Commodity outlook and top trading ideas by Tradebulls for today

Commodity outlook by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls:

Commodity Outlook: US Dollar index (DXY) has touched 93 for the first time in 2018. DXY is overbought but the uptrend still looks strong and difficult to argue that it is over.  To add momentum to the currency, market are currently pricing in 50% probability of 4 rate hike this year. US Treasury yield is also trading north of 3 percent which should decrease of inflation fear. US Producer Price Index also came lower than expected which should give investors some relief from rising inflation. At present DXY is the king as other central banks which were hinting at tightening monetary policy are now not so sure. Europe growth has turned weak and Bank of Japan is not hinting at rate hike.  Any reversal in DXY will only come below 92.20 so we still remain bullish both in DXY and USDINR. Any correction is only expected below 67 in future and upside target still remains intact of 67.75-67.85.

Given the extent of DXY rally, it is remarkable that gold have held up so well. In fact gold prices have remain steady. Since April, the prices have correlated with US Dollar. DXY has moved 2.75% and gold prices also have moved nearly 2.75%. So far this year, gold has tried testing downside support near $1300 three times and tried venturing towards the high range on four occasions. It is trading near 200 DMA and we feel gold needs to break $1320 before we can confirm upside. Meanwhile it is trading in the rising channel with support at 31030 in MCX and resistance at 31450.

Brent Crude is trading at $77 after US exits Iran Nuclear deal.  Brent crude has hit 3 and half year high. Iran is 3rd largest producer in OPEC and so sanctions will affect the total supply. Managed Money Long:Short ratio is around 12.9 which means long side is getting overcrowded. Money managasers positions have come down from record high of 478557 to 406101. Last time money managers were this bullish was when prices was at $66. It is difficult to gauge the high in MCX but short term trend reversal may come below 4650 which is the up trendline taken from low of 4015 to 4488. Crude oil is making rising wedge so we can expect significant correction once it breaches 4550 on the downside. 

Buy Lead 

Target: Rs 158

Stop Loss: Rs 152
 

Lead continues to trade in range between 150.65 and 158. The oscillator has started trending up especially RSI_14 and is also trading above 50. The stochastic oscillator also has given buy signal. The only negative point in chart is that the current price action is below 200 EMA but the emergences of higher low do suggest buying looking to up the ante. The short term moving average of 13 has given cross over above 30 day which also indicates trend shifting towards buying.  Since Lead has bounced from the lower range of 150.65, we expect now lead to test its upper range of 158 and so we advocate creating long position with stop loss of 152 and target of 158.

Buy Gold

Target: Rs 31,700

Stop Loss: Rs 31,000
 

Gold since start of 2018 is trading in upper channel line.  It has tested thrice the lower end of channel line and four times the upper end of channel line. At present it is above 50% of the apex of channel line.  The oscillator RSI_14 is trending higher and is at currently 57 and RSI_14 with 14 day moving average has given cross over so the trend is bullish. Gold is trading well above its short term and medium term moving average of 13,30 and 50. As long as gold is trading in the upper channel line we recommend buy on dips. The trend is only under threat below 31000 and so we recommend creating long position from here with target of upper channel line resistance of 31700 and stop loss of lower channel line support of 31000.

Sell Aluminum 

Target: Rs 149

Stop Loss: Rs 162
 

Aluminum has retraced back from retracement level of 61.8% taken from high of 178.85 and low of 128.30. The emergence of hanging man candle stick pattern around the retracement of 61.8% shows that the rally is over. The accompanied candles are showing lower top which indicates that selling has started. Also before the hanging man candlestick pattern, we saw couple of doji candles which was preview of buying trend under threat.  At present, aluminum is under the short term trendline so we expect the trend to decline further. We recommend selling with target of 149 and stop loss of 162.


Disclaimer: The analyst may have positions in any or all the stocks mentioned above.