Global Commodity Market Wrap-Up

Last week, the overall commodity prices continued to provide mixed signals as there was lack of major data events impacting the market sentiments. Precious metal and base metal prices traded in a range with a negative bias. Silver prices took technical downside correction while gold prices traded in a fixed trading range due to rising COVID cases. Rising Dollar Index prices further created ambiguity among traders.

However, Agricultural commodities prices strived to recover from recent sell-off with Corn and Soybean prices surged by 5.47% and 5.00% respectively. Energy sector also witnessed mixed momentum as Black gold prices extended its weekly losses while Natural Gas prices were trading in a bullish pattern near its 3-year highs and managed to post positive weekly close. Crude oil settled at 3.05% loss and Natural gas increased marginally by 0.03%. last week.

In the current week, Crude oil prices stole the limelight with new OPEC+ deal providing the long due correction in the black gold prices. Crude oil is primarily trading in a bullish territory. Notably, the OPEC+ group of countries have come to a consensus to gradually remove the production cuts by September 2022 earlier implemented due to the COVID-19 affected crude oil demand.

Meanwhile, continuous rise in US Dollar Index pressurized Precious and Base metals up to certain extent. However, Copper prices are currently holding up having the support of the technical tools. The situation for Base and Precious metals might reverse due to evident new lockdown restrictions in Australia and other parts of the world. On the Agri front, in the current week, Soybean and Soybean oil are facing stiff resistance from the higher levels as well as the falling Crude oil prices. However, the overall fundamentals are decent. Corn prices are witnessing an upside rally. The upcoming macro events that may impact the market sentiments include an update on Crude Oil Inventory, US Unemployment Claims, The Conference Board Consumer Confidence, and Australian Consumer Price index released quarterly.

Having understood the global commodities performance over the past one week, taking cues from major global economic events, and based on our technical analysis, noted below are our recommendations with the generic insights, entry price, target prices, and stop-loss for  Crude Oil September Futures (NYMEX: CLU1) and Copper September Futures (LME: CMCUU21) for the next 1-2 weeks’ duration:

Crude Oil September Futures Contract (NYMEX: CLU1)

Price Action and Technical Indicator Analysis:

On the daily chart, NYMEX WTI Crude Oil Futures prices have been under pressure from the high of USD 76.98 and made a recent low of USD 65.21 level on 20 July 2021. After this massive sell-off, crude oil futures are continuously sustaining above the horizontal trend line and taking support of the same. A bullish hammer candlestick pattern (bullish reversal) is formed on the daily chart, which may attract bulls over the short-term. 

However, prices are trading below the trend-following indicators 21-period SMA and 50-period SMA. The leading indicator RSI (14-period) is trading near an oversold zone (~37.53 levels), indicating a possibility of price reversal. Now the next crucial resistance level appears to be at USD 70.70, and prices may test that level in the coming sessions (1-2 weeks).

As per the above-mentioned price action and technical indicators analysis, we can conclude that Crude Oil September Futures (CLU1) is looking technically well-placed for a ‘Buy’ rating. Investment decision should be made depending on an investors’ appetite on upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered. Technical summary of our ‘Buy’ recommendation is as follows:

LME Copper September Futures (LME: CMCUU21)

Price Action and Technical Indicator Analysis:

LME Copper Futures is trading above the rising trend line support level at USD 9080 and continuously taking support of it. Currently, price is trading in an upward trajectory, forming a series of higher tops and higher bottoms. Moreover, the prices are trading above the trend-following indicators 50-period SMA, indicating a bullish trend. The leading indicator RSI (14-period) is trading at ~53.51 level. Now the next crucial resistance level appears to be at USD 10020, and prices may test that level in the coming sessions (1-2 weeks).  

LME Copper Warehouse Inventory (MCU-STOCKS) Vs LME Copper Continuous Price (CMCUc1)

Copper inventories in Warehouse have rebounded sharply from Mid-May 2021 onwards halting the continuous rise in copper prices. Notably, Copper inventories data stood at 2,24,400 tons on 20th July 2021 in LME Warehouses. Now, the copper stocks are trying to move down as per the above chart that might support the copper prices in the coming weeks.

As per the above-mentioned price action and technical indicators analysis, we can conclude that LME Copper September Futures (CMCUU21) is looking technically well-placed for a ‘Buy’ rating. Investment decision should be made depending on an investors’ appetite on upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered. The summary of our recommendation is as follows:

Upcoming Major Global Economic Events

Market events occur on a day-to-day basis depending on the frequency of the data and generally include an update on employment, inflation, GDP, WASDE report, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the commodities prices:

Futures Contract Specifications

Disclaimers 

Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.80:1.00), however, returns are generated within 1-2 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within short investment duration. Investment recommendations provided in this report are solely based on technical parameters, and fundamental performance of the commodities has not been considered in the decision-making process. Other factors which could impact the commodity prices include market risks, regulatory risks, interest rates risk, currency risks, and social and political instability risks etc.

Entry Price: For the recommendation(s), the Entry Price is assumed to be at a certain level with a slight deviation on either side. A slight deviation (Example 1.0%-1.5%) on either side in the ‘Entry Price’ can be considered depending upon the upside or downside potential expected and also taking into consideration the Target 1 levels and Stop-loss levels.

Note 1: Investors can consider exiting from the stock if the Target Price mentioned as per the Technical Analysis has been achieved and subject to the factors discussed above.

Note 2: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the commodity. Commodity with high volumes is more liquid compared to the lesser ones. Liquidity in commodity helps in easier and faster execution of the order. 

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Risk Reward Ratio: Risk reward ratio is the difference between an entry point to a stop loss and profit level. We suggest ~80% Stop Loss of the Target 1 from the entry point.

The reference date for all price data, volumes, technical indicators, support, and resistance levels is July 21, 2021 (Chicago, IL, USA 02.23 AM (GMT -5). The reference data in this report has been partly sourced from REFINITIV. 

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any commodity evaluation. The above are illustrative analytical factors used for evaluating the commodity; other parameters can be looked at along with additional risks per se.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.