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Global Commodity Technical Analysis Report

Commodities Continue to Showcase Bullish Trend, 2 Commodities Gaining Strength – Nickel, Palladium

Feb 02, 2022

Global Commodity Market Wrap-Up

Last week, the global commodities maintained its primary bullish trend except the precious metals which traded in a range. The weaker dollar index prices, Ukraine-Russia war woes and slowing economic growth kept the overall commodity prices at the higher end. Meanwhile, after the breakout of $1835, the gold prices again came down to its existing range. Notably, Gold prices settled at a 2.56% weekly loss while silver prices settled at a weekly loss of 8.27%. Base metals also felt the heat as Nickel and copper prices came to its crucial support levels. However, the overall trend still seems positive for Base metals. Notably, Lead and Copper prices witnessed the weekly decline of 4.59% and 4.22% respectively while zinc also traded in a range with the weekly loss of -0.98%.

On the Energy front, Crude oil prices continued with an upside rally without any major correction and settled at a weekly gain of 1.97%. Meanwhile, all the limelight was caught by natural gas prices which surged sharply over Russia-Ukraine tensions. Natural Gas settled at a weekly gain of 22.66%. Agricultural commodity prices also picked up the pace from good supporting levels. Meanwhile, Corn and Soybean prices settled at 3.20% and 3.94% weekly gains respectively while Sugar prices settled at a weekly loss of 3.70%.

In the recent week, most of the commodity prices started the weak with a positive tone except Lead and Zinc prices which witnessed some correction. On the energy front, Crude Oil and Natural gas continues to maintain an upside trend. Precious metals continue to trade in a range below its 21-period SMA.

The upcoming macro events that may impact the market sentiments include an update on US ADP Non-Farm Employment Change, US Unemployment Claims, and US Unemployment Rate data released monthly.

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 Nickel Futures (LME: CMNIH22) and Palladium Futures (NYMEX: PAH2) for the next 1-2 weeks’ duration:     

Nickel Futures Contract (LME: CMNIH22)

Price Action and Technical Indicator Analysis:

On the weekly chart, LME Nickel price broke the upward sloping trend line resistance and the prices are sustaining above the breakout line from the past several weeks. Moreover, the prices are trading above the trend-following indicator 21-period and 50-period SMA, indicating positive momentum. Further, RSI (14-period) is trading at ~65.05 level, indicating bullish momentum. Now the next crucial resistance levels appear to be at USD 23875 and USD 24880 and the prices may test that levels in the coming sessions (1-2 weeks).             

As per the above-mentioned price action and technical indicators analysis, we can conclude that Nickel March Futures (CMNIH22) 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’ recommendations is as follows:

Palladium Futures (NYMEX: PAH2)

Price Action and Technical Indicator Analysis:

On the weekly chart, Palladium price broke the upward sloping trend line by an upside and the prices are also sustaining above the same from past several weeks. Moreover, the prices are trading above the trend-following indicators 21-period and 50-period SMA, further supporting bullish stance for the commodity. The leading indicator RSI (14-period) is trading at ~59.82 level, indicating positive momentum for the commodity prices. Now the next crucial resistance level appears to be at USD 2568, 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 Palladium March Futures (PAH2) 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 February 02, 2022 (Chicago, IL, USA 04.04 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.


Disclaimer-

Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.

Kalkine Media LLC, an affiliate of Kalkine Equities LLC, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.