Global Commodity Market Wrap-Up

Last week, most of the commodities showed strength amid volatility in markets due to the Russia-Ukraine fiasco. The weakness in the dollar index and continuous sell-off in the global equity markets kept the overall commodity prices at the upper end. Precious metals continued to trade in a bullish momentum where Gold prices settled at a 3.13% weekly gain while Silver prices settled with a weekly gain of 2.67%. Gold clearly outperformed Silver due to the recent geopolitical scenario. Base metals are currently hovering in a range with a bullish tone though the prices are trading in an overbought zone. Notably, Lead and Copper prices witnessed a weekly surge of 3.18% and 1.05%, respectively while Zinc traded in a range with a weekly loss of 1.06%.

On the Energy front, Crude oil prices witnessed some correction after straight eight consecutive weekly rallies over the Russia-Ukraine issue and settled at a weekly loss of 1.32%. Natural gas prices also getting volatility in recent times and last week settled with a weekly gain of 11.23%. Agricultural commodity prices are mostly trading in a range with a positive bias.

In the current week, commodity prices are witnessing positive movement except for base metals prices that are already trading in an overbought region. Precious metals are trading with a mixed tone after a good upside movement last week. On the energy front, Natural gas prices are trading in a bullish territory this week as well while Agricultural commodities are showcasing positive price momentum.

The upcoming macro events that may impact the market sentiments include an update on US GDP Second Estimates (Fourth Quarter, 2021), Crude Oil Inventories, Unemployment Claims data, and Core PCE Price Index data released monthly.

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 Silver Futures (COMEX: SIH2) and Nickel Futures (LME: CMNIH22) for the next 1-2 weeks:

Silver Futures Contract (COMEX: SIH2)

Price Action and Technical Indicator Analysis:

On the weekly chart, COMEX Silver prices broke a descending channel pattern by an upside and are sustaining above the upper band of the channel breakout from the past two weeks. Prices are trading above the 21-period SMA which is supportive for an upside price action. Further, RSI (14-period) is trading at ~52.61 level, which indicates positive price momentum. Now the next crucial resistance levels appear to be at USD 24.67 and USD 25.52 and the 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 Silver March Futures (SIH2) is looking technically well-placed for a ‘Buy’ rating. Investment decisions 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 technical summary of our ‘Buy’ recommendations is as follows:

Nickel Futures (LME: CMNIH22)

Price Action and Technical Indicator Analysis:

On the weekly chart, the Nickel price has shown a significant rally in the past couple of weeks. However, prices are now facing the resistance of upward sloping trend line that indicates the possibility of profit booking at higher levels. The prices are trading above the trend-following indicators 21-period and 50-period SMA, acting as an immediate support level. RSI (14-period) is trading at an overbought region at ~72.20 level, indicating expected downside correction from key resistance levels. There is a negative RSI divergence with prices clearly visible on charts that further support the negative stance. Now the next crucial support level appears to be at USD 25499 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 March Futures (CMNIH22) is looking technically well-placed for a ‘Sell’ rating. Investment decisions 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 ‘Sell’ 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 February 23, 2022 (Chicago, IL, USA 02.25 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.