Global Commodity Market Wrap-Up

Last week, the commodity basket hovered in a tight range with a positive bias owing to stagnant dollar index and surging new cases of Omicron variant across the world. Meanwhile, the gold and silver prices are trading in a range with weaker tone last week. Notably, Gold prices settled at a 1.67% weekly loss while silver prices settled at a weekly loss of 4.00%. Base metals also traded in a range with positive bias as the prices are taking good support from the lower levels technically. Recent buying in the Iron ore prices also supported the base metal segment. Meanwhile, Nickel prices broke the long consolidation and moved up above the crucial resistance levels. Nickel demand is rising due to surge in buying from Electric Vehicle manufacturers. Lead and Zinc prices witnessed the weekly loss of 1.43% and 0.54% respectively.

On the Energy front, Crude is again catching upside momentum as the prices recovered well above from the supporting levels and settled at a gain of 4.91%. The natural gas prices are also trying to break its consolidation at lower levels and settled at a weekly gain of 4.99%. While most of the Agricultural commodity prices are showing signs of positivity as Corn and Soybean prices settled at 2.28% and 5.30% weekly gain respectively while Sugar prices settled at a weekly loss of 4.40%.

In the recent week, most of the commodities started with a positive tone. Base metals specially Nickel is getting an upside rally recently while Crude Oil and Natural gas also witnessed some buying. Precious metals are also showing some movement but still hovering in a range.

The upcoming macro events that may impact the market sentiments include an update on US Consumer Price Index data, Producer Price Index data, Industrial Production data, and US Unemployment Claims data released weekly.

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 Natural Gas Futures (NYMEX: NGH22) and Nickel Futures (LME: CMNIG22) for the next 1-2 weeks’ duration:              

Natural Gas Futures Contract (NYMEX: NGH22)

Price Action and Technical Indicator Analysis:

On the weekly chart, NYMEX Natural Gas price broke the downward sloping trend line resistance in the existing week and the prices are sustaining above the downward sloping trend line breakout line. Moreover, the prices are trading above the trend-following indicator 50-period SMA, indicating positive momentum. Further, RSI (14-period) is trading at ~48.68 level, indicating bullish momentum. Now the next crucial resistance level appears to be at USD 4.80, 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 Natural Gas March Futures (NGH22) is looking technically well-placed for a ‘Buy’ rating. Investment decision should be made depending on an investors’ 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’ recommendations is as follows:

Nickel February Futures (LME CMNIG22)

Price Action and Technical Indicator Analysis:

On the weekly chart, Nickel prices broke an upward sloping trend line in the current week and the prices are also sustaining above the same. Moreover, the prices are trading above the trend-following indicators 21-period and 50-period SMA, further supporting bullish stance. The leading indicator RSI (14-period) is trading at ~69.11 level, indicating positive momentum for the stock prices. Now the next crucial resistance level appears to be at USD 23060, 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 Nickel February Futures (CMNIG22) is looking technically well-placed for a ‘Buy’ rating. Investment decision should be made depending on an investors’ appetite for 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 ‘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 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 January 12, 2022 (Chicago, IL, USA 02.35 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.