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Commodities outlook & trading strategies by Bhavik Patel of Tradebulls Sec

There are signs of bullish momentum in Silver after witnessing formation of 'hammer' candlestick pattern
Gold market is consolidating right now and despite the US dollar slumping, gold has failed to recover. Gold lacks clear directional bias despite an improved risk appetite and weakness in the US dollar. The impeachment of ex-US President Donald Trump is not happening soon so that news is out of the way but next trigger for gold would be US President Joe Biden's fiscal stimulus. Large precious metals speculators increased their net long positions in the Gold futures markets marginally last week. Gold has support at 48,500 in MCX as that is the level that has not been breached since 11th Jan and multiple times, that level has been tested.

Silver has been choppy and swinging between $25 to $26 since last one week. US real yields have been dropping in, which is likely to stop any sell-off from getting too deep in Silver. Right now, 50EMA is at $26 which is providing resistance while $25 has been providing support. II. Traders should wait for breakout above $26 which will give silver momentum on the upside. So far buyers remain elusive and for sellers, $25 is to the level to beat to gain momentum on the downside.

Oil prices have recovered after expected than larger crude oil draw. Reasons for dragging the prices down are China lockdowns, the IEA's grim outlook on oil demand and a slow global rollout of the coronavirus vaccine. Next round of stimulus payment from the US are also not happening right now but despite such bearish news, crude oil continues to trade higher indicating that undertone is still bullish. There are also signs that physical supply of crude will tighten over the first quarter because of lower oil exports from Russia and Iraq next month, as well as the Saudi extra cut of 1 million bpd for February and March. Moreover, Iraq, OPEC's second-largest producer after Saudi Arabia, has pledged to pump less oil this month and next to make up for excess production last year.

The weather is expected to be cooler than normal throughout most of the United States’ west coast, and warmer than normal across most of the mid-west and east coast for the next 2-weeks. Weather models over the weekend materially boosted heating demand estimates. Natural Gas has resistance around 195-196 and it needs to breach that level before buyers gets confidence to go long.

Recommendation:

Buy Silver | TGT: 67,850 | Stop loss: 65,400

Silver in COMEX is stuck between $25 and $26 and in MCX, there are signs of bullish momentum after witnessing formation of 'hammer' candlestick pattern. Since last 8 trading session, silver is also taking support at its 50 EMA on daily scale with RSI_14 near to neutral zone of 50. We expect some momentum on the upside with bulls accelerating their buying above $26. We recommend long position with expected target of 67850 and stoploss of 65400.

Sell Lead below 160 | TGT: 155 | Stop loss: 163.50

Lead Feb future contract has taken taken support twice at 160.60 in relative short time indicating immediate support at that level. Any breach below that would shift the momentum to the downside as base metals are already consolidating at the higher levels. Steam has run out at higher levels and they are waiting for any trigger to initiate any fresh short positions. So we recommend short in Lead Future below 160 for possible target of 155 and stoploss of 163.50 closing basis. 

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Disclaimer: Bhavik Patel is Sr. Technical Analyst (Currencies/Commodities) at Tradebulls Securities. Views are personal.


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