Global Commodity Market Wrap-Up

Last week, most of the commodity prices tanked majorly impacted by rising US Dollar Index as well as from rising concerns over new COVID-19 variant ‘Omicron’ found in South Africa. Meanwhile, Gold and Silver are not able to hold their grounds and took sharp correction from higher levels. Now, crucial support level for Gold stands at $1750, if hold the levels then the yellow metals could regain its losing strength. Notably, Gold prices settled at a 3.57% weekly loss while silver prices settled at a weekly loss of 6.76%. Base metals continue to trade in a range. Last week, Copper and Zinc prices witnessed weekly loss of 1.70% and 0.95% respectively while Lead is the only commodity that has shown some gains compared to other commodity segments.   

On the Energy front, Crude oil prices witnessed its 5 consecutive negative closing and settled at a loss of 10.26% while Natural gas prices showed some upside move from key supporting levels and settled at a weekly gain of 6.45%. Agricultural commodity segment prices are continuously showing range bound movement as Sugar and Soybean prices settled at 3.20% and 0.83% weekly loss respectively while Corn prices settled at a weekly gain of 2.80%. Sugar prices have recently broke its crucial support of USc 19.61 on the technical weekly chart that also lies over its 21-period SMA that might further push the prices to downside. Meanwhile, Global Supply and Demand balance of Sugar signifies bullishness in prices in the longer run and the prices have seen a significant rally in recent times due to lower sugar production from World largest sugar producer Brazil and India’s higher sugarcane diversion for making ethanol thanks to country’s ethanol blending program which urge Indian millers to use sugarcane more for making ethanol rather than sugar.   

Looking at the recent week, all the commodity segments continue to trade in a weak territory except lead. Uncertainty of COVID-19 new variant over the economies creates fear among commodity sector prices. On the Energy front, sharp correction in Crude oil prices makes it lucrative for fresh buying. Upcoming crude oil inventories and OPEC-JMMC meetings will decide the fate of the future direction of crude oil prices in the coming sessions.

The upcoming macro events that may impact the market sentiments include an update on ADP Non-Farm Employment Change data, Crude Oil Inventories data, OPEC-JMMC Meetings, and US Unemployment Claims data 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 Futures (NYMEX: CLF2) and Sugar No. 11 Futures (ICE: SBH2) for the next 1-2 weeks’ duration:     

Crude Oil Futures Contract (NYMEX: CLF2)

Price Action and Technical Indicator Analysis:

On the weekly chart, NYMEX Crude oil prices are sustaining above an upward sloping trend line support at USD 64.41 level. Moreover, the leading indicator RSI (14-period) is trading at ~46.58 level, which supports a positive stance. Further, the prices are trading above the trend-following indicator 50-period SMA, which may act as crucial support zone. Now the next crucial resistance level appears to be at USD 71.84, 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 January Futures (CLF2) is looking technically well-placed for a ‘Buy’ rating. Investment decision should be made depending on an investors’ appetite for 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:

Sugar No. 11 March Futures (ICE: SBH2)

Price Action and Technical Indicator Analysis:

On the weekly chart, ICE Sugar No.11 price broke the horizontal trend line support level of USc 18.83 and is sustaining below the same from past one week. Moreover, the prices are trading below the trend-following indicator 21-period SMA indicating negative momentum. Further, RSI (14-period) is trading at ~48.26 level, indicating bearish momentum. Now the next crucial support level appears to be at USc 17.60, 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 March Futures (SBH2) is looking technically well-placed for a ‘Sell’ rating. Investment decision should be made depending on an investors’ appetite for 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 December 01, 2021 (Chicago, IL, USA 03.55 AM (GMT -6). 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.