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Global Commodity Technical Analysis Report

Commodities Prices Fell as US Dollar Recovered, Two Commodities in a Sell Zone – Silver, Lumber

Feb 09, 2023

Global Commodity Market Wrap-Up

Last week, commodities prices witnessed sharp decline amid recovery in US Dollar Index. Gold prices felt the pressure from higher levels and settled with a weekly loss of 3.41%; Also, Silver closed with a loss of 5.15%. On the Energy front, Crude Oil prices continued its weak tone and settled at a weekly loss of 7.89%. Moreover, Natural gas prices declined sharply and settled with a weekly loss of 15.41%. Meanwhile, Agricultural commodities prices were traded sideways last week.

In the current week also, most commodities are recovering from last week’s fall. The precious metals prices are trading in a slightly positive direction in the current week. On the energy front, Crude Oil and Natural gas prices are also getting buying interest from lower levels. The agricultural commodities basket is trading in a mixed tone in the existing week.

The upcoming macroeconomic events that may impact the market sentiments include an update on Prelim UoM Consumer Sentiment, US Consumer Price Index, and Unemployment Insurance Claims released weekly.

Having understood the global commodities performance over the past week, taking cues from major global economic events, and based on technical analysis, noted below are the recommendations with the generic insights, entry price, target prices, and stop-loss for Silver March Futures (COMEX: SIH3) and Lumber March Futures (CME: LBH3) for the next 1-2 weeks duration:

Silver March Futures Contract (COMEX: SIH3)

Price Action and Technical Indicator Analysis:

COMEX Silver March Futures' prices broke a downward sloping trend line support by downside and the prices are sustaining below the breakout level from past few trading sessions, indicating the possibility of a downtrend. Moreover, the leading indicator RSI (14-period) is trading at ~37.69 level, which further supports weak trend. The prices are trading below the 21-period and 50-period SMA on a daily chart, which may act as an immediate resistance level in the near term.

Now the next crucial resistance levels appear to be at USD 21.42 and USD 20.54, and prices may test these levels in the coming sessions (1-2 weeks). 

As per the above-mentioned price action and technical indicators analysis, Silver March Futures (COMEX: SIH3) is looking technically well-placed for a ‘Sell’ rating. Investment decision should be made depending on an individual’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Technical summary of ‘Sell’ recommendation is as follows:

Lumber March Futures Contract (CME: LBH3)

Price Action and Technical Indicator Analysis:

CME Lumber March Futures' prices broke an upward sloping trend line by downside and the prices are sustaining below the breakout level from past few trading sessions, indicating the possibility of a downtrend. Moreover, the leading indicator RSI (14-period) is trading below the moderate zone at ~49.25 level, which further supports weak trend. The prices are trading below the trend following indicator 21-period SMA on a daily chart, which may act as an immediate resistance level in the near term.

Now the next crucial resistance levels appear to be at USD 433.00 and USD 415.00, and prices may test these levels in the coming sessions (1-2 weeks). 



As per the above-mentioned price action and technical indicators analysis, Lumber March Futures (CME: LBH3) is looking technically well-placed for a ‘Sell’ rating. Investment decision should be made depending on an individual’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Technical summary of ‘Sell’ 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

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 Individuals 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.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: Individuals 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 3: 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 at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Risk Reward Ratio: The risk reward ratio is the difference between an entry point to a stop loss and profit level. This report is based on ~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 08, 2023 (Chicago, IL, USA 08.07 PM (GMT -6). The reference data in this report has been partly sourced from REFINITIV.

Note: Trading decisions require a thorough analysis by individuals. Technical reports in general chart out metrics that may be assessed by individuals 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.

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