Commodity outlook by Tradebulls Securities: Buy Natural Gas, sell Copper

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

Gold: Although gold prices are currently trading below initial support at $1,500 an ounce, market is still holding on to most of its gains since June, which is a positive sign. Precious metals speculators were back to adding their Gold bullish positions this week after a sharp selloff last week by over -40,000 contracts. Short term support for Gold comes at 37,950 and there is resistance at 38,400 which is trendline taken from high of 38,950 to 38,450. It is currently at 50 per cent retracement taken from the recent swing high of 38,950 and low of 37,206. Selling pressure may commence below 37,900 then we can see levels of 37,500 and strong buying only comes above 38,600.

Silver: Silver speculator bets rebounded slightly this week after speculators had trimmed their bets for four straight weeks. Silver is near to its 50 per cent retracement taken from recent high of 48,320 and low of 43,960. It has quite a bit of resistance zone around 45,900-46,300. It needs to break this barrier for further upmove although we still are advocating buy on dips as long as 44,800 is not breached on the downside. Last week, silver got hammered after positive trade talk news but still managed to close above that level and on Tuesday managed to gain 700 points yesterday.

Crude oil saw prices crashing after Beijing asking for further talks before signing phase one and after Russia’s statement that OPEC and its Russia-led non-OPEC partners in the production cut pact are currently not discussing changing the terms of their agreement. Brent markets also have pulled back a bit from the 50 day EMA, an area that of course will always attract a lot of attention from a technical standpoint. Ultimately, we have filled a bit of a gap from the Friday open, and now have bounced a bit at the $59 level. In MCX, Crude oil is trading below 200 DMA and 50, 20 DMA on the hourly chart. 3,900 is resistance zone as it is both 200 DMA and latest swing high. Intraday crude needs to move above 3830 for any long position. On downside, major support comes around 3,700.

Rupee: It was a rocky ride for Indian rupee as USDINR is oscillating between 71.50-70.50. High CPI has weakened Indian rupee as RBI will have less room for rate cut. CPI came at 3.99% just shy below 4% due to rise in food prices. 72 is important resistance and if USDINR manages to surpass that levels, expect bulls to stretch prices till 72.80. Bears need to defend 72 levels. Downside is limited to 70.50

Recommendation:

Buy Natural Gas around 160

TGT: 180

Stoploss: 150

Emergence of ‘Doji’ Candlestick pattern after correction from 194 to 156 shows selling pressure has abated and investors are getting sideways. Rally from 156 after emergence of Doji to 170 and then back to 164 shows now bulls starting to gain hold of Natural Gas. Injection season is now coming to end and historically Natural gas prices show positive momentum before the winter season. Risk reward ratio for long is favourable since Natural Gas is languishing at bottom end so buy near 160 for target of 180 and stoploss of 150.

Sell Copper

 TGT: 433

Stoploss: 444

Copper on the daily scale is trading below short term moving average of 20 and 50. It is also trading below 200 DMA and RSI_14 is under 44 which show the trend is negative. ‘Hanging man’ candlestick pattern on a swing high of 444 does not augur well for Copper as it shows that buying momentum has faded. Follow up candles after hanging man were all negative showing bears are in control. So we recommend sell with an expected target of 433 and stoploss of 444.

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Disclaimer: Views expressed are the author's own. He may have positions in one or more stocks.