Trading strategies for Crude oil and Zinc by Bhavik Patel of Tradebulls Sec

Gold prices recently hit $1,900 but struggled to maintain the momentum and have crashed once again. Fresh restrictions from the UK triggered risk-on mode and the US dollar soared, leading to selling in precious metals. Meanwhile, data released on December 22 showed the US economy grew at a record pace in the third quarter which also helped the US Dollar. This week Gold started on a strong note as the US Congress passed $900 billion stimulus bill but Donald Trump is not willing to sign it which is creating further headwinds for precious metals. If the new virus reaches the US and infects more people, then we may see some tailwinds for Gold. Currently gold is expected to trade in range of $1850-$1900. 
 

Silver prices saw significant volatility and have been trading between $27.50 to and $25 after the UK government announced fresh lockdown. Precious metals have seen two-way price action, caught between their obvious safe-haven characteristics and a stronger dollar. 65,500 is support for silver and any breach below that level could see silver slipping till 63,000.

Oil rally, fueled by vaccine progress, is running out of steam. With fresh lockdown from the UK and more lockdown appearing in European countries, demand for crude is likely to take hit during Christmas season which usually is peak demand season for crude. Flights have been out of commission and travelling is also getting banned. API news agency reported higher-than-expected inventory which sent crude prices down. December 21's decline could also spur more hedge funds to unload positions after piling into bullish bets since early November. Time spreads in oil, an indicator of future market fundamentals, have rallied, suggesting supply will balance out by early next year. Oversupply may come next year if OPEC decides to boost production.

Lastly, Natural Gas bulls have something to cheer about. The weather model trends have been trending colder and that is why prices have started rallying. Natural Gas production will also be kept in check as with oil prices steady, there is less exploration for Shale Oil from US. Natural Gas producers are showing no intention of increasing production so even if winter demand turns out to be bearish, the injection season from April to November will be lower than normal resulting in ~3.3 Tcf at most by November 2021.

Recommendation:

Sell Crude Oil | TGT: 3,350 | Stoploss: 3,620

Crude made a 'Hanging Man' candlestick pattern when it was in overbought state. That should give relevance to the reversal candlestick pattern. We have seen sharp correction after the 'Hanging Man' Candlestick pattern. Prices have support at 3,400 where 20-DMA comes and 3,350 where previous swing low is. We recommend short with expected move till 3,350 and stoploss of 3,620 closing basis.

Sell Zinc | TGT: 212 | Stoploss: 223

Zinc has made 'Bearish Belt Hold' Candlestick pattern which is a reversal pattern. We have seen negative divergence on RSI-14 on daily scale which is suggesting the upside momentum is stalling. Price has started trading below its 20-DMA, suggesting that we might see more downside. So sell near 218-219 for expected target of 212 and stoploss of 223.

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Disclaimer: Bhavik Patel is Sr. Technical Analyst (Currencies/Commodities) at Tradebulls Securities. Views are personal.