Global Commodity Market Wrap-Up

Last week, the commodity prices witnessed positive momentum over Russia-Ukraine war woes. Meanwhile, Taiwan’s Ally US sends its fifth attack submarine to Guam which created volatility in the markets. However, despite the rising US dollar index, Gold and Silver witnessed strength as traders considered precious metals as a safe haven amid volatile times. Notably, Gold and Silver prices settled at a 1.17% and 0.72 weekly gains. Base metal prices paused last week after a good performance in the recent weeks. Dip in crude oil prices and fresh lockdown in Chinese cities also impacted the demand of Base metals up to a certain extent. Zinc and Lead prices witnessed a weekly decline of 2.16% and 2.45% respectively while Copper prices also witnessed marginal weekly loss of 0.41%.

On the Energy front, Crude oil prices have extended its losses last week amid new lockdown restrictions in China. Crude oil prices settled at a weekly loss of -1.02%. On the contrary, Natural gas prices have moved up considerably with good volume support. Natural gas prices settled at a weekly gain of 9.76%. However, Agricultural commodity prices traded in a positive bias as Soybean and Corn prices witnessed 6.71% and 4.59% weekly gains respectively.

In the recent week, primarily all the commodity prices are trading in a positive zone as Russia refused to extend peace talks with Ukraine. Precious metal prices are continuously trading in an upward tone. Base metals are also moving up in-line with rising energy prices. On the energy front, Crude oil and Natural gas prices are getting good upside movement amid sanctions-hit Russian energy supply shortage. Agricultural commodity basket is trading with mixed tone. However, wheat is facing export disruption in the Black Sea due to Russia-Ukraine conflict.

The upcoming macro events that may impact the market sentiments include an update on US Producer Price Index, Unemployment Claims data, Crude Oil Inventories and China GDP data released quarterly.

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 Wheat May Futures (CBOT: WK2) and Crude Oil June Futures (NYMEX: CLM2) for the next 1-2 weeks:    

CBOT Wheat May Futures Contract (CBOT: WK2)

Price Action and Technical Indicator Analysis:

On the weekly chart, CBOT Wheat prices recently broke a downward sloping trend line by upside and the prices are sustaining above the breakout level from past two weeks that indicates prices are likely to move up further in the coming sessions. Prices are also trading above its ascending channel pattern breakout level from past several weeks which also support our bullish stance. Prices are also trading above its 21-period and 50-period SMA that is supportive for the price action. Further, RSI (14-period) is trading at ~63.44 level, which indicates positive price momentum. Now the next crucial resistance levels appear to be at USc 1160.75 and USc 1230.00 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 CBOT Wheat May Futures (WK2) 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:

NYMEX Crude Oil June Futures Contract (NYMEX: CLM2)

Price Action and Technical Indicator Analysis:

On the daily chart, NYMEX Crude Oil prices recently broke the downward sloping trend line by upside with good volume support and the prices are sustaining above the same from past two days. Further, RSI (14-period) is trading at ~51.38 level, which indicates positive price momentum. Now the next crucial resistance levels appear to be at USD 108.11 and USD 115.21 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 NYMEX Crude Oil June Futures (CLM2) 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:

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 April 13, 2022 (Chicago, IL, USA 04.10 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.