Global Commodity Market Wrap-Up

Last week, there was a significant turnaround in metal commodity prices as they surged upwards, attracting considerable buying interest. Gold particularly showed strength, posting a notable gain of 2.88%. Silver followed suit, experiencing a robust increase of 6.80%. Among base metals, copper saw a modest rise of 1%, while zinc maintained its positive momentum, gaining by 0.65%. However, lead was the outlier, experiencing a slight loss of -0.27% despite the overall bullish trend in the market. This shift marks a reversal from the previous week's downturn, signaling renewed optimism and investor confidence in the metals market.

Last week, Natural Gas prices continued their upward trajectory, posting a notable gain of 2.81%. This recovery marks a significant turnaround from the previous week's performance, reflecting improved market sentiment and demand dynamics. On the other hand, Crude Oil prices experienced a marginal increase of 0.10%, indicating some stability after the previous week's decline, although tensions in the global landscape remained subdued. Additionally, US Sugar saw a modest gain of 0.10%, contributing to the positive momentum in agricultural commodities.

Global commodities have recently rebounded from their recent lows, buoyed by a variety of global developments. Precious metals are currently trading above resistance levels with a slightly bullish bias. In the energy sector, Natural Gas has shown strong momentum, while Crude Oil prices are testing the support level at these prices. Agricultural commodities are also on an upward trajectory.

The upcoming Micro and Macroeconomic events that may impact market sentiments include an update on the US Jobless Claims data, building permit data, Philadelphia Fed Manufacturing Index data and Exiting Home Sales data.

Having understood the global commodities performance over the past week, taking cues from major global economic events, and based on technical analysis, noted below is the recommendation with the generic insights, entry price, target prices, and stop-loss for Aluminium June Future (LME: CMALM24) for the next 2-4 weeks duration:

Aluminium June Future (LME: CMALM24)

Price Action and Technical Indicator Analysis:

Aluminium futures market is witnessing a significant surge in June prices, bolstering the base metal prices index. This uptrend comes amidst a backdrop of easing global tensions, contributing to a favorable trading environment. The leading indicator, RSI (14-period), shows a reading of approximately 59.81, indicating the possibility of further upside. Furthermore, the current price is trading above its 21-period and 50-period SMAs, which are likely to act as support in the near term.

Now the next crucial Resistance levels appear to be at USD 2640.00 and USD 2680.00, and prices may test these levels in the coming sessions (2-4 weeks).

As per the above-mentioned price action and technical indicators analysis, Aluminium June Future (LME: CMALM24) is looking technically well-placed for a ‘Buy’ rating. Investment decisions should be made depending on an individual’s appetite for downside 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 the ‘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 a 2-4 weeks’ time frame. This may be looked at by Individuals with sufficient risk appetite looking for returns within short investment duration. The investment recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the commodities has not been considered in the decision-making process. Other factors which could impact 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 May 16, 2024 (Chicago, IL, USA 1:53 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.