Global Commodity Market Wrap-Up

Last week, almost all the commodity prices moved upside. Meanwhile, Precious metals also traded in a primary bullish trend amid turbulence caused by Russia-Ukraine events. Yellow metal settled at a 1.29% weekly gain while silver prices also settled at a weekly gain of 2.10%. Base metals have also witnessed some upside traction from the key supporting levels. Zinc and Lead prices have witnessed a weekly surge of 6.48% and 5.19% respectively while Copper prices eased with a marginal weekly loss of -0.84%.

On the Energy front, Crude oil prices have rallied from lower levels and settled at a weekly gain of 10.49%. Natural gas prices have recently showed some promising upside move and settled at a weekly gain of 14.46%. However, Agricultural commodity prices traded with a positive bias as Soybean and Corn prices witnessed 2.53% and 1.65% weekly gains respectively.

In the recent week, primarily all the commodity prices are trading in a negative zone amid fresh attacks by Russia in Ukraine which increased volatility. Precious metal prices are now taking support of the moving averages on a monthly charts and is currently in a good buying zone. Base metals is the only segment which is trading in green in the existing week as the prices are reversing from key levels.

The upcoming macro events that may impact the market sentiments include an update on Crude Oil Inventories, ADP Non-Farm Employment Change, Unemployment Claims data, and Core PCE Price Index 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 Copper April Futures (LME: CMCUJ22) for the next 1-2 weeks:

LME Copper April Futures Contract (LME: CMCUJ22)

Price Action and Technical Indicator Analysis:

On the daily chart, LME Copper prices recently broke a downward sloping trend line by upside and the prices are sustaining above the breakout level from the past five days which indicates prices are likely to move up further in the coming sessions. Prices are also trading above its 21-period and 50-period SMA that is supportive for the price action. Further, RSI (14-period) is trading at ~59.58 level, which indicates positive price momentum. Now the next crucial resistance levels appear to be at USD 10696.65 and USD 11200 and the prices may test these levels in the coming sessions (1-2 weeks).    

LME Copper Warehouse Inventory (MCU-STOCKS) vs. LME Copper Continuous Price (CMCUc1)

Copper inventories in Warehouse is surging slightly from March 2022 onwards after the inventories fell to 69600 tons in the first week of March 2022 from higher levels of 254,800 tons made on 20^th August 2021 in LME Warehouses. Notably, Copper inventories stood at 87,925 tons on 29th March 2022. Now, the copper stocks are moving up as per the above chart backed by lower inventories in LME warehouses that might support the copper prices in the coming weeks.

As per the above-mentioned price action and technical indicators analysis, we can conclude that LME Copper April Futures (CMCUJ22 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 30, 2022 (Chicago, IL, USA 03.38 AM (GMT -5). 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.