Commodity outlook and top trading ideas by Tradebulls for today

Commodity outlook by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls:

Commodity Outlook: US Dollar index is at three and half month high. The main driver behind the rally is 10 Year US Treasury Yields hitting 3 percent mark for the first time in 4 years. It has made high of 3.03 and is now trading around 3.01. We believe the last line of defense for bears in US Dollar index is 91.65. Dollar Index has flirted with the high of 91 and it seems it may sustain above it. If it manages to break 91.65, we may see more short covering happening.  Back to our currency, USDINR May future has broken 67 level and looking at our macro data we expect our currency to depreciate further. On daily chart, next resistance comes at 67.50 and we may see this level getting tested within a week or two. Any reversal in trend can only come if USDINR trades below 66.50. For now, we don’t see that scenario playing out. Any appreciation in our currency may only come either if Crude oil prices crashes below $65 in Brent or 10 Year US Treasury Yield moving below 2.90 level.

Gold has been affected by rising US Treasury yield and strong US Dollar. However in MCX, the fall was capped thanks to weak Indian Rupee.  With geopolitical and trade risk in the rear view mirror for the time being, there is no incentive for gold to push its prices higher. Technically too Gold in COMEX is unable to sustain above $1355 and has fallen back to its trading range of $1313-1350. Now that it is trading around $1326, we don’t expect significant fall but expect it to trade in range. In MCX, the trend still is bullish with higher bottom and trend reversal may only come below 30900. Silver, on the other hand, still looks weak.  In COMEX, once again it has come below $17 and 200 Day moving average. With correction in base metals, silver bears are getting active and pushing prices down. Out of gold and silver, we are bearish in silver and any long position can only be taken above 41000.

High US Crude oil inventory did not make any negative impact on its prices. Market shrugged off the high inventory data and continues to focus on the sanctions US may put on Iran on 12th May. Higher demand and lower OPEC output also is auguring well for crude oil prices. We believe as long as the magic figure of $70 in Brent is not breached on the downside, we would remain long.  Both technically and fundamentally, the set up still remains bullish. In MCX, 4400 is the level which if gets broken, then trend reversal may happen and we may expect decent correction till 4150. For time being since prices are trading at elevated levels; we advice investors to tread lightly on their positions.

Base metals prices are moving all over the place and with volatility so high; it becomes difficult for traders to judge short term trend. With increasing LME inventory in Zinc and decreasing cancelled warrant, we are bearish in Zinc, Lead and Nickel. The only base metal which looks neutral to bullish is aluminum. Higher top and higher bottom is seen in Copper but the trend looks like it is exhausting. Secondly, Copper is facing headwinds around 464, so short term we expect Copper to test levels of 454.

Silver Sell

Target: Rs 30,700

Stoploss: Rs 31700

Inside day bar pattern emerged on top in daily chart in Silver. The accompanied candles after the pattern were negative giving significance to the inside day bar chart pattern.  Short term trend remains negative as the prices are under 13 day moving average.  It is near to 200 day moving average and RSI_14 is under 51 indicating the upside momentum is over.  The stochastic has given sell signal when the fast stochastic has given sell cross over slow stochastic. Price action, oscillators are all pointing south so we advocate shorting Silver with target of 30700 and stop loss of 31700.

Sell Copper

Target: Rs 448

Stoploss: Rs 462

Copper is trading in up channel line. The upper end of the channel line comes around 465 and previously too 465 have proven to be strong resistance. At present Copper is trading support near the lower end of the channel line. With ongoing correction being witnessed in base metals, we expect copper to breach the channel line.  The moving averages have started to curve downwards, a precedence signal of momentum exhaustion.  We would recommend creating short position in Copper with Target of 448 and stop loss of 462 closing basis.

Buy Aluminum

Target: Rs 153

Stoploss: Rs 144

Aluminum after huge volatility and price action is stabilizing around its 38.2% retracement.  Aluminum is making base after correcting more than 20% in 4 trading session. In order to move up, it needs to stay above 145 and at the moment it is making nice base for the upmove. It is trading above 50 day and 200 day moving average. There is no divergence in any oscillator and if we look at data from Jan 2018 to Mar 2018, 145 have proven to be strong support so we expect bounce back from current levels and advice buy with stop loss of 144 and target of 153.

Disclaimer: The analyst may have positions in any or all the stocks mentioned above.

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