Commodity outlook by Tradebulls Securities: Buy lead, natural gas

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

The dollar index has posted 12 straight gains, a feat not seen since 2016. Post-FOMC, DXY recovered from lows of 96 to high of 97. The dollar index is gaining by default as other non-US currencies are falling. The Indian rupee on the other hand after rate cut from RBI had gained for 6 consecutive sessions but since the last couple of trading session have succumbed to strong Dollar. Clearly, the trend still is bearish for USDINR and the trend reversal will only come above 71.50 closing basis. Any longs accumulated below 71 should be booked around 71.50.

Gold in COMEX is weighing down by strong US Dollar. Investors are now focused on the new round of trade talks between China and the United States that started in Beijing on Monday. Gold remains dollar play and at present, dollar is recovering. We do expect the global economy to weaken and therefore central banks will resist rate hikes and give some consideration to rate cuts which would help the precious metals enormously. In MCX, we are expecting gold to test levels of 32800 to 32600. Any long positions should be booked and wait for levels of 32600 before taking long positions. Gold is still expected to be positive as long as it is above $1300. The technical indicators for gold are in the overbought zone but have now turned south as this correction plays out.

Increase in US rig count has again given bears some edge and we saw crude trading negative at the start of the week.  But Crude oil since then has recovered on the back of OPEC monthly report that Saudi Arabia is willing to cut its production of 5,00,000 barrels per day above its production cut quota. Fall in US inventory is also helping crude manage some gains. Crude has broken the resistance of $62-$63 so we expect Crude now to test levels of $66-$68. In MCX, Crude has multiple resistances in area around 3900-4000. Any strong boost will come above 4000.

Buy Lead
TARGET: Rs 148
Stop loss: Rs 139

Lead on the daily chart has taken support at its 38.2% retracement taken from its swing high of 153.50 and low of 135.30. Increase in cancelled warrant and support from retracement does indicate that we may see a bounce in Lead. Lead also has taken support and is trading above its 50DMA which again further confirms a positive trend. RSI_14 has reversed from 45 levels so we would recommend long with expected move till 148 and stop loss of 139 closing basis.

Buy Natural Gas
TARGET: Rs 200
Stop loss: Rs 178

Natural Gas is trading at July 2018 low i.e. at the low before winter started. Now the injection season will start soon but Natural Gas is deeply in oversold territory and we are expecting some bounce from the current level. Selling pressure has clearly exhausted as it is now consolidating near 182-185 range. RSI_14 has reversed after being in an oversold region so we are recommending long with a target around 200 and stop loss below 178.

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


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