Global Commodity Market Wrap-Up

Last week, commodities prices rebounded from crucial support levels amid a dip in the US dollar index. Gold prices witnessed buying from lower levels and settled with a weekly gain of 2.06%, while silver prices also settled at a weekly gain of 8.41%. Base metals also traded with good upside momentum after most of the base metals like Nickel, Copper, and Zinc prices witnessed an upside breakout technically. Notably, Copper and Lead prices have witnessed a weekly surge of 6.47% and 0.57%, respectively, while Zinc prices also settled with a weekly gain of 11.15%.

On the Energy front, Crude Oil prices also settled at a weekly gain of 4.14%. Last week, natural gas prices increased marginally and settled at a weekly gain of 0.41%. Meanwhile, Agricultural commodities also showed some positive movement, with Soybean and Corn prices witnessing 14.12% and 9.22% weekly gains, respectively. However, Sugar prices declined last week and settled at a weekly loss of 1.96%. 

In the current week, most commodities are trading in a mixed tone. The precious metals prices are showing some correction, especially silver, which surged sharply last week. Base metals are also trying to maintain last week’s momentum. On the energy front, Crude Oil and Natural Gas prices are also trading in the red zone. The agricultural commodities basket is witnessing mixed price reactions, with Sugar prices reversing from lower levels while Soybean and corn prices are getting some correction.

The upcoming macroeconomic events that may impact the market sentiments include an update on OPEC-JMMC Meetings, Natural Gas Inventories, Unemployment Insurance Claims, and US Non-Farm Employment change released monthly.

Having understood the global commodities performance over the past one week, taking cues from major global economic events, and based on technical analysis, noted below are recommendations with the generic insights, entry price, target prices, and stop-loss for Sugar No. 11 October Futures (ICE: SBV2) and Zinc September Futures (LME: CMZNU22) for the next 1-2 weeks duration:

Sugar No. 11 October Futures Contract (ICE: SBV2)

Price Action and Technical Indicator Analysis:

ICE Sugar No. 11 October Futures' prices are trading in a descending channel pattern and currently hovering near the lower band of the channel pattern. Prices broke a downward sloping trend line by an upside and are sustaining above the breakout point from the past two days, indicating prices might move up further. A positive RSI divergence with the price clearly visible on a daily chart further supports a bullish stance. The leading indicator RSI (14-period) is trying to reverse from the oversold region and trading at ~38.25 levels, which indicates prices are picking up an upside momentum. 

Now the next crucial resistance levels appear to be at USc 18.45 and USc 19.06, and prices may test these levels in the coming sessions (1-2 weeks). 

As per the above-mentioned price action and technical indicators analysis, Sugar No. 11 October Futures (SBV2) is looking technically well-placed for a ‘Buy’ rating. Investment decision should be made depending on an individual’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Technical summary of ‘Buy’ recommendation is as follows:

Zinc September Futures Contract (LME: CMZNU22)

Price Action and Technical Indicator Analysis:

LME Zinc September Futures' prices witnessed a downward sloping trend line by an upside, and the prices are sustaining above the breakout level from the past two weeks with good volume support that indicates positiveness in the prices. The leading indicator RSI (14-period) stood up from the oversold region and is showing a reading of ~46.06 levels, which indicates the possibility of an upside movement.

Now the next crucial resistance levels appear to be at USD 3646.00 and USD 3758.00, and prices may test these levels in the coming sessions (1-2 weeks). 

As per the above-mentioned price action and technical indicators analysis, Zinc September Futures (CMZNU22) is looking technically well-placed for a ‘Buy’ rating. Investment decision should be made depending on an individual’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Technical summary of ‘Buy’ 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 

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 Individuals 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.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: Individuals can consider exiting from the commodity if the Target Price mentioned as per the Technical Analysis has been achieved and subject to the factors discussed above.

Note 3: 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 at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

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

Risk Reward Ratio: The risk reward ratio is the difference between an entry point to a stop loss and profit level. This report is based on ~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 August 03, 2022 (Chicago, IL, USA 3.24 AM (GMT -5). The reference data in this report has been partly sourced from REFINITIV. 

Note: Trading decisions require a thorough analysis by individuals. Technical reports in general chart out metrics that may be assessed by individuals 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.