Global Commodity Market Wrap-Up

The commodities prices witnessed a sharp downside correction last week. Rally in the dollar index prices along with sluggish demand of industrial metals impacted the prices inversely. Notably, a hawkish stance by the Fed Reserve expecting a hike of interest rates twice by the end of 2023, took the dollar index prices to 2 months high making commodities more expensive. The precious metals also suffered huge weekly losses as Gold and Silver prices settled lower by 5.86% and 7.73% respectively. However, Crude oil prices remained flat as compared to the recent sell-off in other globally traded commodities due to strong demand. The Agricultural Commodities also felt the heat last week with Oilseed prices especially Soybean witnessed decline of 7.46% while US Sugar No. 11 fell by 6.33%.               

Meanwhile, all the major commodities have started this week on a positive tone as they recover from the last week sell-off and we can consider the last week’s price decline as a mere correction from higher levels. The upcoming macro events that may impact the market sentiments include an update on GDP Quarterly Third Estimate, Crude Oil Inventory, The Conference Board Consumer Sentiment, and Unemployment Claims 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 Copper July Futures (LME: CMCUN21) and Cotton No. 2 December Futures (ICE: CTZ1) for the next 1-2 weeks’ duration:

Copper July Futures Contract (LME: CMCUN21)

Price Action and Technical Indicator Analysis:

LME Copper Futures prices are on the verge of the end of the corrective phase and the resumption of an uptrend from the lower levels. On the daily chart, copper prices are trading in a falling channel pattern and sustaining above the lower band of the pattern. In addition, prices are also trading above the rising trend line support level at USD 9000. Moreover, the momentum oscillator RSI (14-period) is trading near the oversold zone at ~37.01, indicating a possibility of price reversal.

However, prices are still sustaining below 21-period and 50-period SMA, acting as the resistance zone for the commodity. Now the next crucial resistance level appears to be at USD 9750, 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 increased sharply in the past one month starting from Mid-May 2021 which depressed the copper prices recently. However, looking at the recent inventories data, copper inventories seems to be falling from peak levels witnessed in April 2021. Copper inventories data stood at 159,800 tons on 21^st June 2021 in LME Warehouses.

As per the above-mentioned price action and technical indicators analysis, we can conclude that Copper July Futures (CMCUN21) 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:

ICE Cotton Dec Futures (ICE: CTZ1)

Price Action and Technical Indicator Analysis:

ICE Cotton Futures prices have been moving in a larger consolidation pattern as per the daily time frame chart is now trying to stage an upside breakout. Cotton prices are trading in a symmetrical triangle pattern and taking the support of the lower band of the pattern. Prices are trading in a positive territory for the fourth straight trading session. Moreover, the prices are trading above the trend-following indicator 21-period SMA and 50-period SMA, indicating a positive trend.

The momentum oscillator RSI (14-Period) is trading at ~56.09 levels, indicating bullish momentum. Now the next crucial resistance level appears to be at USc 90.50, 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 Cotton Dec Futures (CTZ1) 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 in a range. However, a slight deviation on either side in the ‘Entry Price’ can be considered depending upon the potential expected or indicated.

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 June 23, 2021 (Chicago, IL, USA 03:40 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.