Commodity Market Wrap-Up

Last week, commodities prices witnessed a mixed momentum amid a fall in US Dollar Index. The yellow metal witnessed a positive movement and settled with a weekly gain of 2.80%, while Silver prices closed higher by 1.58% weekly. Base metals also traded in a positive tone last week, where Zinc and Copper prices witnessed a sharp upside rally, and Lead prices also settled on a positive note.

On the Energy front, Natural gas prices plunged last week and settled with a weekly loss of 7.84%; however, Crude Oil prices bounced from the lower levels and settled at a weekly gain of 8.26%. Meanwhile, Agricultural commodities were traded in mixed territories.

For the current week, most of the commodities are trading on a positive note. The precious metals prices are trading on a marginal negative note, while base metals are showing further upside momentum after the last week’s rally. On the energy front, Crude Oil and Natural gas prices are recovering from good support levels. The agricultural commodities basket is trading positively in the existing week.

The upcoming macroeconomic events that may impact the market sentiments include an update on US Core Retail Sales, US Philly Fed Manufacturing Index, Unemployment Insurance Claims, etc.

Having understood the global commodities performance over the past week, taking cues from major global economic events, and based on our technical analysis, noted below is our recommendation with the generic insights, entry price, target prices, and stop-loss for Crude Oil February Futures (NYMEX: CLG3) for the next 1-2 weeks duration:

Crude Oil August Futures Contract (NYMEX: CLG3)

Price Action and Technical Indicator Analysis:

NYMEX Crude Oil February Futures' price witnessed the breakout of a falling channel pattern at the USD 78.65 level on January 16, 2023. Since then, the prices are sustaining above the upper band of the channel, which is now acting as a support zone. The leading indicator RSI (14-period) is showing a reading of ~59.17 levels, indicating positive momentum. Now the next crucial resistance levels appear to be at USD 85.20 and USD 88.70, and prices may test these levels in the coming sessions (1-2 weeks).

As per the above-mentioned price action and technical indicators analysis, we can conclude that Crude Oil February Futures (CLG3) is looking technically well-placed for a ‘Buy’ rating. Investment decisions should be made depending on an investor’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. Technical summary of our ‘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 

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 given recommendation(s), the Entry Price is assumed to be at or above/ at or below a certain level. However, a slight deviation in the 'Entry Price' can be considered depending upon the upside/downside potential expected and taking into consideration the Target levels indicated. For example: - An Investor can consider entering the commodity at or above/ at or below a certain range (1%-1.5%) from the Entry Levels recommended depending upon the potential upside/downside expected. Therefore, there can be a slight deviation between the ‘Entry Price’ and the ‘Current Market Price (CMP)’. The ‘Entry Price’ indicated above may or may not be same as the ‘CMP’ shown in the price chart.

Note 1: Investors 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 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 commodity 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 commodity 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 commodity prices.

Risk Reward Ratio: The 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 January 18, 2023 (Chicago, IL, USA 12.15 AM (GMT -6). 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.