Global Commodity Market Wrap-Up

Last week, most of the commodities continued to trade with some positive bias. The stagnant dollar index prices and increasing new cases of omicron variant kept the broader markets in a range. Meanwhile, the gold and silver prices witnessed its first positive weekly closing last week after 4 consecutive weekly losses as new variant created uncertainty in the US and European cities. Notably, Gold prices settled at a 1.17% weekly gain while silver prices settled at a weekly gain of 1.57%. Base metals also slowly moved upward taking good support from the lower levels technically. Recent buying in the Iron also supported the base metal segment. Lead and Zinc prices witnessed the weekly gain of 1.28% and 2.33% respectively.

On the Energy front, after a significant downfall in Crude oil prices from higher levels, prices are showing volatile movement on a daily chart and settled at a loss of 1.06%. The natural gas prices fell drastically and trading in a range at lower levels due to mild weather forecasts in the US impacting the demand for the commodity.  Natural gas settled at a weekly loss of 6.43%. Agricultural commodity prices are continuously showing range bound movement as Corn and Soybean prices settled at 0.55% and 1.38% weekly gain respectively while Sugar prices settled at a weekly loss of 3.04%.

In the recent week, most of the commodity prices are maintaining its last week upside movement. Copper and Crude Oil prices are recovering from the lower levels. Precious metals are trying to move in a range with positive bias while Agri-commodities are also consolidating at current levels.

The upcoming macro events that may impact the market sentiments include an update on US GDP 3^rd Quarter Final Estimates, Core PCE Price Index data, Revised UoM Consumer Sentiment, 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 Copper Futures (LME: CMCUF22) and Silver Futures (COMEX: SIF2) for the next 1-2 weeks’ duration:             

Copper Futures Contract (LME: CMCUF22)

Price Action and Technical Indicator Analysis:

On the weekly chart, LME Copper price broke the downward sloping trend line resistance at USD 9475.50 level on October 13, 2021 and is sustaining above the downward sloping trend line. Prices are also taking support of the horizontal trend line at USD 8799.21 level. Moreover, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA, indicating positive momentum. Further, RSI (14-period) is trading at ~52.79 level, indicating bullish momentum. Now the next crucial resistance level appears to be at USD 9895, 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 Copper January Futures (CMCUF22) 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:

Silver January Futures (COMEX SIF2)

Price Action and Technical Indicator Analysis:

On the weekly chart, COMEX Silver price broke the downward sloping trend line at USD 23.50 level on October 19, 2021 and sustaining above the breakout level from past 10 weeks. Moreover, the prices are trading below the trend-following indicators 21-period and 50-period SMA, acting as an immediate resistance level. Further, the leading indicator RSI (14-period) is trading at ~40.61 level, indicating indecision for the stock prices. Now the next crucial support level appears to be at USD 23.80, 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 January Futures (SIF2) 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. The summary of our ‘Buy’ 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 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 22, 2021 (Chicago, IL, USA 02.50 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.