comGlobal Commodity Market Wrap-Up

Last week, commodities prices witnessed positive movement amid a correction in the US dollar index. Gold prices witnessed lower level buying and settled with a weekly gain of 1.40%, while Silver prices also settled at a weekly gain of 0.15%. Base metals also traded with slightly positive momentum as the markets are hoping for new possibilities of infrastructure projects in China that may support Copper and Lead prices. Notably, Copper and Lead prices have witnessed a weekly surge of 3.61% and 3.57% respectively, while Zinc prices also settled with a weekly gain of 2.82%.

On the Energy front, Crude Oil prices settled at a weekly gain of 1%. Natural gas prices surged sharply last week and settled at a weekly gain of 18.29%. Meanwhile, Agricultural commodities are the one segment that traded in red last week. Notably, Soybean and Corn prices witnessed a 2.15% and 6.62% weekly loss, respectively. Sugar prices also tanked last week and settled at a weekly loss of 7.06%.

In the current week, most of the commodities are showing positive momentum. The precious metals prices are showing some downside movement after a marginal recovery last week. Base metals are also trying to maintain last week’s momentum. On the energy front, Crude Oil and Natural Gas prices are also trading in the green zone; however, technically the prices are trading around crucial resistance levels in both commodities. The agricultural commodities basket is showing some upside traction from lower levels.

The upcoming macroeconomic events that may impact the market sentiments include an update on Crude Oil Inventories, FOMC Meeting Minutes, GDP, 2^nd Quarter 2022 (Advance Estimate), Unemployment Insurance Claims, and Core PCE 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 technical analysis, noted below are recommendations with the generic insights, entry price, target prices, and stop-loss for Crude Oil September Futures (NYMEX: CLU2) and Natural Gas September Futures (NYMEX: NGU22) for the next 1-2 weeks duration:

Crude Oil September Futures Contract (NYMEX: CLN2)

Price Action and Technical Indicator Analysis:

NYMEX Crude Oil September Futures' prices are facing the resistance of a downward sloping trend line and the prices are drifting down continuously with good volume support that indicates that prices might fall further in the coming sessions. Also, prices are trading below its 21-period SMA on a weekly chart that further support our bearish stance. The leading indicator RSI (14-period) came down to a moderate zone from the overbought region and is trading at ~50.38 levels, which indicates prices are trading in a weak momentum. 

Now the next crucial support levels appear to be at USD 89.99 and USD 85.72, and prices may test these levels in the coming sessions (1-2 weeks).

As per the above-mentioned price action and technical indicators analysis, Crude Oil September Futures (CLU2) is looking technically well-placed for a ‘Sell’ rating. Investment decision should be made depending on an individual’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Technical summary of ‘Sell’ recommendation is as follows:

Natural Gas September Futures Contract (NYMEX: NGU22)

Price Action and Technical Indicator Analysis:

NYMEX Natural Gas September Futures' prices witnessed a sharp recovery and tested its rising wedge pattern resistance line after the prices broke the pattern in June 2022. Prices now come to a 161.8% Fibonacci extension ratio that indicates profit booking might occur from the key resistance levels in the coming sessions. The leading indicator RSI (14-period) is trading near the overbought region at ~67.94 levels, which indicates the possibility of a downside correction.

Now the next crucial support levels appear to be at USD 7.93 and USD 7.28, and prices may test these levels in the coming sessions (1-2 weeks).

As per the above-mentioned price action and technical indicators analysis, Natural Gas September Futures (NGU22) is looking technically well-placed for a ‘Sell’ rating. Investment decision should be made depending on an individual’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Technical summary of ‘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 

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 Individuals 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.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: Individuals 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 3: 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 at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Risk Reward Ratio: The risk reward ratio is the difference between an entry point to a stop loss and profit level. This report is based on ~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 27, 2022 (Chicago, IL, USA 3.33 AM (GMT -5). The reference data in this report has been partly sourced from REFINITIV. 

Note: Trading decisions require a thorough analysis by individuals. Technical reports in general chart out metrics that may be assessed by individuals 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.