Global Commodity Market Wrap-Up

Last week, most of the commodities from the basket witnessed good upside rally last week with continuous selling pressure in Dollar index that especially encourage investors to buy precious metals. Notably, gold is slowly regaining from lows and recovered by ~9% from the flash low levels made during the second week of August 2021.

Base metals like Copper and Lead witnessed a marginal weekly gain of ~0.10% and ~0.16% respectively.  Base metal prices were under pressure as China released its third batch of metals from its state reserves on 1^st September 2021 that includes 30,000 tons of copper to safeguard its small and medium enterprises which are suffering from continuous rise in metal prices. On the Energy front, Crude oil prices witnessed marginal gains of 0.80% as OPEC+ group have agreed to increase the Crude Oil output by 0.4 million barrels/day in the October month in OPEC-JMMC Meetings held last week. Natural Gas prices witnessed sharp upside rally on technical grounds with overall weekly gains of 7.38%.

Agricultural commodities witnessed negative weekly closing last week as Soybean, sugar and Corn prices dropped significantly with grain export facing obstacles from the Hurricane Ida causing power disruptions in the busiest US export terminals in New Orleans that kept the export surpluses in the domestic markets in the short term resulting in decline in prices.

In the existing week, all commodities are trading in a weak tone with Dollar index prices showing some rebound. In the agricultural sector, Soybean, Corn and Sugar prices are showing negative price movement and might continue its bear run in the coming weeks from the technical standpoint. Crude oil prices might also feel the heat as OPEC+ group agreed to increase the oil output in October while Natural gas prices showed some correction from higher levels but it is still trading in a positive territory. 

The upcoming macro events that may impact the market sentiments include an update on JOLTS Job Opening data, US Unemployment Claims, Crude Oil Inventories, and Producer Price Index 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 Crude Oil Futures (NYMEX: CLV1) and Corn Futures (CBOT: CZ1) for the next 1-2 weeks’ duration:

Crude Oil October Futures Contract (NYMEX: CLV1)

Price Action and Technical Indicator Analysis:

On the weekly chart, NYMEX crude oil price broke the upward sloping trend line by downside and prices are sustaining below an upward sloping trend line since the breakout. Currently, price is trading in a lower top and lower bottom formation on a medium term weekly chart further supporting our bearish stance. Moreover, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA, acting as an immediate support levels. The leading indicator RSI (14-period) is trading at ~56.34 level. Now the next crucial support level appears to be at USD 65.50, 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 October Futures (CLV1) 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:

CBOT Corn December Futures (CBOT: CZ1)

Price Action and Technical Indicator Analysis:

On the weekly chart, CBOT Corn price witnessed a breakout of the upward sloping trend line resistance at USc 524 level on September 06, 2021. Moreover, the prices are trading above the trend-following indicators 21-period SMA highlighting the negative price trend. The leading indicator RSI (14-period) is trading at ~47.48 indicating weak price momentum. Volumes are also surging with price decline further indicating sellers are active in the commodity. Now the next crucial support level appears to be at USc 475, 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 CBOT Corn December Futures (CZ1) 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 September 08, 2021 (Chicago, IL, USA 03.46 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.