Global Commodity Market Wrap-Up

Last week, commodities prices traded with a mixed tone amid the rising US dollar index and slow economic growth that put a brake on the rising prices of various commodities. Gold prices traded in a range with a weekly gain of 1.14%, while silver prices also settled at a weekly gain of 0.11%. Base metals have taken some resistance from higher levels due to the economic slowdown. Copper and Lead prices have witnessed a weekly decline of 0.55% and 1.15%, respectively, while Zinc prices have also declined and settled with a weekly loss of 4.46%.

On the Energy front, Crude oil prices maintained the bullish rally last week and settled with a weekly gain of 1.51%. Natural gas prices have also shown some upside traction and settled at a weekly gain of 3.84%. Agricultural commodity prices traded in positive territory in line with the rise in crude oil prices. Notably, Soybean and Corn prices witnessed 2.81% and 6.256% weekly gains, respectively. Sugar prices also declined last week and settled at a weekly loss of 2.18%.

In the recent week, primarily all the commodities prices are showing a downside trend majorly impacted by a sharp rise in the US dollar index. Precious metal prices are still trading in a short-term downtrend while Base metals are now taking resistance from crucial levels and trading in a moderate zone. On the energy front, Crude oil and Natural gas prices are now getting resistance from higher levels. Notably, a sudden rise in Crude oil inventories depresses the prices up to a certain extent. The agricultural commodities basket is also showing some correction from higher levels with Sugar prices is trading below its 21-period SMA. Now all eyes are on the upcoming FOMC Statement which might decide the fate of the commodities prices in the coming weeks.

The upcoming macro events that may impact the market sentiments include an update on US Retail Sales, Crude Oil Inventories, FOMC Statement, 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 Crude Oil August Futures (NYMEX: CLQ2) and Sugar No. 11 July Futures (ICE: SBN2) for the next 1-2 weeks’ duration:

Crude Oil August Futures Contract (NYMEX: CLQ2)

Price Action and Technical Indicator Analysis:

NYMEX Crude Oil August Futures' prices were trading in a rising wedge (bearish) pattern and the prices recently broke the rising wedge pattern by downside indicating possibility of a decline in prices in the coming period. There is an RSI negative divergence with the price clearly visible on a weekly chart that further support our bearish stance. The leading indicator RSI (14-period) is trading at overbought region at ~73.23 levels and supporting a negative stance. Now the next crucial support level appears to be at USD 112.43 and USD 104.53, 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 Crude Oil August Futures (CLQ2) 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. Technical summary of our ‘Sell’ recommendation is as follows:

ICE Sugar No. 11 July Futures (ICE: SBN2)

Price Action and Technical Indicator Analysis:

On a weekly chart, ICE Sugar No. 11 July futures’ price broke the upward sloping trend line by downside and the prices are sustaining below the breakout level from past one week. The prices are also trading below its 21-period SMA, which also support our bearish stance. The momentum oscillator RSI (14-Period) is trading at ~48.28 levels further indicating weak price momentum. Now the next crucial support level appears to be at USc 17.52, 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 Sugar No. 11 July Futures (SBN2) 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 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 June 15, 2022 (Chicago, IL, USA 01.49 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.