Global Commodity Market Wrap-Up

Last week, most of the commodities (Agricultural and Non-Agricultural) showed moderate to decent upside gain. Corn and Soybean witnessed more than 9% gain amid the USDA quarterly stock data showing lower stocks in hand by 18% and 44% respectively till June 1, 2021, compared to last year. The precious metals witnessed slight weekly gains despite of rise in the US Dollar Index which reached to its 3-month high levels last week. In the Energy Sector, the lack of outcome in the recent OPEC meetings suppressed the prices of Crude oil as well as Natural gas this week. Base Metals prices showed mixed sentiments as there is no clarity of the future price direction.        

Meanwhile, all the major commodities have started this week on a negative tone as the dollar index prices are trading in an upward trajectory which may have a short-to-medium term impact. The upcoming macro events that may impact the market sentiments include an update on FOMC Meeting Minutes, Crude Oil Inventory, OPEC-JMMC Meetings, 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 Silver July Futures (COMEX: SIN1) and Crude Oil August Futures (NYMEX: CLQ1) for the next 1-2 weeks’ duration:

Silver July Futures Contract (COMEX: SIN1)

Price Action and Technical Indicator Analysis:

COMEX Silver Futures prices witnessed a selling pressure from the higher levels. Currently, prices are facing strong resistance of its falling trend line on the weekly chart. Prices recently, broke out the upward sloping trend line support at USD 27.72 level on June 16, 2021. Since the breakout, prices are sustaining below the trend line which indicates the possibility of a change in the trend.

Moreover, the prices are trading below the trend-following indicator 21-period SMA, indicating a bearish trend. The momentum oscillator RSI (14-Period) is trading at ~50.96 level, which is supporting a bearish stance. Now the next crucial support level appears to be at USD 24, 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 Silver July Futures (SIN1) 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:

NYMEX Crude Oil August Futures (NYMEX: CLQ1)

Price Action and Technical Indicator Analysis:

NYMEX Crude Oil Futures prices witnessed an undisputed rally from low of USD 61.36 made on May 2021 to the recent high of USD 76.98 tested as on 06 July 2021. Currently, prices are trading in a rising wedge formation for the past 1 year and facing the resistance of an upper band on the weekly chart.

However, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA. The leading indicator RSI (14-period) is trading in an overbought zone (~74.28 levels) and formed a negative divergence indicating that a correction from here may drift the price lower towards the lower band of the pattern. 

Now the next crucial support level appears to be at USD 70, 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 August Futures (CLQ1) 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 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 July 07, 2021 (Chicago, IL, USA 02.46 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.