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Global Commodity Technical Analysis Report

Commodities Gained Strength Despite Weak Dollar Index, One Commodity in a Buy Zone - Sugar No. 11

Mar 02, 2022

Global Commodity Market Wrap-Up

Last week, most of the commodities showed strength amid heavy volatility in the markets. Commodities moved up despite the recent increase in the US dollar index's prices. Precious metals took correction from higher levels after a sudden sharp rise in the prices. Gold prices settled with a -0.65% weekly loss while silver prices settled with a marginal gain of 0.02%. Last week, base metals showed some improvement in prices compared to the prior week. Notably, Zinc and Lead prices witnessed a weekly surge of 1.28% and 0.37%, respectively while Copper traded in a range with a marginal weekly loss of 0.08%.

On the Energy front, Crude Oil prices continued to move northward due to the Russia-Ukraine event and settled at a weekly gain of 1.53%. Natural gas prices also settled with a weekly gain of 2.12%. Agricultural commodity prices are mostly traded in a range.

 

In the recent week, commodity prices are witnessing positive movement due to rising geopolitical tensions among Russia and Ukraine. Crude oil stole all the limelight compared to other commodity baskets and currently trading above its $100 per barrels. Precious metals are also trading in a positive tone after the gold prices are trading above its key support level of $1835 per troy ounce from past couple of weeks. Natural gas prices are trading in a consolidation phase as the prices stuck in a symmetrical triangle formation technically on a weekly chart. Agricultural commodities are showcasing positive price momentum in the existing week.

The upcoming macro events that may impact the market sentiments include an update on OPEC-JMMC Meetings, Crude Oil Inventories, Unemployment Claims data, and US Non-Farm Employment Change 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 recommendation with the generic insights, entry price, target prices, and stop-loss for Sugar No.11 Futures (ICE: SBK2) for the next 1-2 weeks:           

Sugar No. 11 May Futures Contract (ICE: SBK2)

Price Action and Technical Indicator Analysis:

On the weekly chart, ICE Sugar No. 11 prices broke the downward sloping trend line by upside and the prices are sustaining above the breakout level from the past one week. Prices are trading above its 50-period SMA that is supportive for the price action. Further, RSI (14-period) is trading at ~51.01 level, which indicates moderate price momentum. Now the next crucial resistance levels appear to be at USc 18.94 and USc 19.65 and the prices may test these levels in the coming sessions (1-2 weeks).

As per the above-mentioned price action and technical indicators analysis, we can conclude that Sugar No. 11 May Futures (SBK2) is looking technically well-placed for a ‘Buy’ rating. Investment decisions 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 technical summary of our ‘Buy’ recommendations 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 commodity 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 commodity 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 commodity 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 commodity prices.

Risk Reward Ratio: The 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 March 01, 2022 (Chicago, IL, USA 23.20 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.