Manner Global Commodity Market Wrap-Up

Last week, mixed sentiments prevailed in various commodity segments. Precious metals started trading in a bullish trajectory despite of increase in dollar index that is trading at 15 months high levels. Base metals witnessed decent upside move last week as Lead and Zinc metals attained weekly gain of 4.09% and 5.79% respectively.

On the Energy front, Crude oil prices continued its one-sided rally with the overall weekly gain of 4.57%. However, Natural Gas slipped from higher levels and settled at a marginal loss of 0.96%.

Recent WASDE report had bearish impact on Agricultural commodity prices especially for Corn and Soybean. In the recent WASDE report, the agency has increased the ending stocks for US Corn as well as for US Soybean due to an upside revision in the opening stock and the domestic production for the marketing year 2021-22. Notably, Corn and Sugar price settled in red at 2.03% and 0.28% respectively last week. However, Sugar prices soared by 1.15% on a weekly basis.     

In the existing week, most of the base metals and precious metals continue their last week price trend and rose consistently amid  fear of rising Crude oil, Natural gas and Coal prices facing severe shortages which might have negative impact on global economies. Crude oil and Natural oil prices have paused after a significant upside movement.

The upcoming macro events that may impact the market sentiments include an update on FOMC Meeting Minutes, US Unemployment Claims, Crude Oil Inventories, and US Retail Sales 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 Nickel Futures (LME: CMNIZ21) and Crude Oil Futures (NYMEX: CLZ1) for the next 1-2 weeks’ duration:     

Nickel December Futures Contract (LME: CMNIZ21)

Price Action and Technical Indicator Analysis:

LME Nickel Futures is trading above the rising trend line support level at USD 18050 and continuously taking support of the same. The leading indicator RSI (14-period) is trading at ~52.93 level indicating bullish momentum. Furthermore, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA, which may act as a support zone. Now the crucial resistance levels appear to be at USD 19790 and USD 20665, and 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 Nickel December Futures (CMNIZ21) 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:

Crude Oil November Futures (NYMEX: CLZ1)

Price Action and Technical Indicator Analysis:

On the weekly chart, NYMEX Crude Oil price witnessed a robust rally from the low of USD 69.67 to a high of USD 82.18 tested on 11 October 2021. Currently, prices are facing resistance of the rising trend line at USD 82.40 and sustaining below the trend line resistance level. Moreover, the momentum oscillator RSI (14-period) is trading in an overbought zone at (~72.73 level) and formed negative divergence, which might indicate the possibility of a downside correction from the higher levels. However, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA which may act as a crucial support level for the prices. Now the next crucial support level appears to be at USD 75, 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 Crude Oil December Futures (CLZ1) is looking technically well-placed for a ‘Sell’ 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 ‘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 recommendation(s), the Entry Price is assumed to be at a certain level with a slight deviation on either side. A slight deviation (Example 1.0%-1.5%) on either side in the ‘Entry Price’ can be considered depending upon the upside or downside potential expected and also taking into consideration the Target 1 levels and Stop-loss levels.

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 October 13, 2021 (Chicago, IL, USA 03.18 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.