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Gold in overbought zone, wait for correction before buying: Bhavik Patel

Gold has given a return of 25.7 per cent so far this year.
Gold has given a return of 25.7 percent so far this year. It is trading at all-time-high as investors are lapping up to hedge their exposure from risky assets. Renewed cases of Covid-19 is keeping bulls in the hunt. Above $1820, we can see prices till $1850-$1870 in a short period. On MCX, it is already trading at all time high but some caution is warranted as gold prices are in the overbought zone. Any investor thinking of buying gold at the current market rate should wait for any correction as it is unwise to chase gold at such high prices.

Silver is near to 11-year high and breached 51,000 level in MCX. Silver has relatively underperformed gold but in COMEX if it manages to break $19, then we can soon see levels till $20. Silver might catch up gold and in the short term, we would advocate to have more exposure in silver than gold.

Crude oil prices are trading in the range of 2995-3100 since the past 4 trading sessions. Underlying trends are still bullish as US imports have increased giving confidence that demand is improving. Prices are confined in a narrow range and we would wait for breakout or breakdown before taking any trade. Headwinds for crude is US June oil production rebounded but remains far below March levels. Given the recent rebound in refining margins, a move to $45 in Brent is plausible.

The rally in Natural Gas has played out as it has shot up from 120 levels to 145 levels. Now the commodity will consolidate in a range of 10 points as NG is waiting for a further cue. Last week the number of cooling days increased by 10.3% week on week which was why we have seen prices rallying above 140. This week's weather condition continues to warm up and nationwide cooling days are expected to increase by 12.3% week on week which will give support to prices.

Recommendation:

Buy Natural Gas: TGT 148 Stoploss 132

Natural Gas has made a hammer candlestick chart pattern on a daily scale. RSI is quoting above 55 and prices have recently taken support at 50 EMA. Momentum oscillator is suggesting more upside and so we recommend going long around 136 for the expected target of 148 and stoploss of 132.

 
Buy Nickel: TGT 1045 Stoploss 984

Nickel has broken out from its previous swing high of 995 and managed to sustain above it. After February, it has for the first time closed above its 200 DMA. This reverses the trend for Nickel as it has now come from a bearish trend to bullish trend. Prices are comfortably trading above its 20 and 50 EMA and we would like to wait for some correction as RSI is near to overbought zone. Trend is still bullish so buy around 1005 for the expected target of 1045 and stoploss of 984 closing basis.

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


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