Commodity outlook by Tradebulls Securities: Buy silver, copper

Commodity outlook and trading ideas by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls.

The Dollar index is flirting with lows around sub 96 levels. If we look at US 10 year yield, it has climbed to a fresh top above 2.72%. On Tuesday, we saw US dollar gaining momentum but high US yield has again put pressure on US dollar and now it is trading below sub 96 levels. Fed is thinking of taking a pause in their tightening cycle so dollar has retraced but Indian rupee continues to weaken on the back of weak production data, rise in crude oil price and sustained outflow by foreign investors. The support for rupee has shifted now from 69.40 to 70.30. Next resistance comes at 71.60 and we expect the rupee to touch 71.60-71.80 before retracing back to sub 71 levels. In short term, rupee has become overstretched but we still expect it to depreciate against dollar. Buy on dips should be the strategy as long as 70.80 is not breached on the downside.

Gold is oscillating between $1299 and $1280. Some concern is now after rallying from $1256 to $1299, gold is trading sideways. Upside momentum has not lost but has slowed down so we urge traders should book profit and take long positions only above $1300. Gold might correct to $1274 if equity markets starts reversal and US dollar starts getting stronger. Our short term target for gold still stands at 32500 but we expect some retracement till 31850 before gold again starts its upward momentum. 

Oil prices is trading steady above $61 onthe back of China's plan to introduce policies to stabilize the slowing economy. The stimulus will cover the fears about economic slowdown and weakness in crude oil demand. Output cuts from the OPEC and other producers, including Russia, also have begun to reduce fears of oversupply. Further support has come from data showing the number of U.S. rigs drilling for new oil dipped slightly to 873 in early 2019. Crude has successfully defended $60 in Brent and is making base for further upside movement till $63-$64. In MCX as long as 3550 is not breached, we expect crude to test levels of 3820 and buy on dips should be the strategy until 3550 is not breached.

Buy Silver 

TARGET: Rs 40,500 

STOP LOSS: Rs 39,700

Silver has strong resistance at 39800. Since past 5 trading session, silver is unable to sustain above that level. So we would recommend creating long only above 40,000 with stop loss of 39,700 and target of 40,500. RSI_14 is above 50 so the bullish trend is confirmed. On a daily scale, price action is seen in ‘ascending triangle’ chart pattern and we need to confirm the breakout post 40,000 levels so buy silver only above 40,000 levels.

Buy Copper 

TARGET: Rs 435 

STOP LOSS: Rs 418

Copper on daily scale is making inverse head and shoulder pattern and the neckline breakout comes above 424. Just like silver, we would recommend taking long position in copper only above 425 with target of 435 and stop loss of 418. Copper is trading above its short term moving average of 13 and 20 and is near its 50 day moving average. Its 200 DMA comes around 438 which is our target post breakout above 425. RSI_14 is above 53 with no divergence so buy only above 425 with target of 435 and stop loss of 418.

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