Global Commodity Market Wrap-Up

Last week, commodities prices declined due to the recession concerns, expectations of hike in interest rates, and rising US dollar index. Gold prices declined last week and settled with a weekly loss of 1.54% majorly impacted by rising dollar index while silver prices also declined sharply and settled at a weekly loss of 5.17%. Base metals are among the worst performing commodity segment last week. Notably, Lead and Zinc prices have witnessed a weekly decline of 5.12% and 12.83%, respectively, while Copper prices settled with a weekly decline of 6.09%.

On the Energy front, Crude Oil prices have started to move downside and settled at a weekly loss of 6.65%. Also, natural gas prices also traded in a weak tone and settled at a weekly decline of 5.21%. Meanwhile, Agricultural commodities prices were traded in negative territory tracking energy prices.

In the current week, commodities prices are trading in a mixed tone. The precious metals prices are showing mixed trend with yellow metal prices are trending downwards while silver prices are trying to reverse from key supporting levels. Base metals are also trying to take some breathe after heavy sell-off in the prices last week. On the energy front, Crude Oil and Natural gas prices are trading in a weak territory. 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 US Unemployment Insurance Claims, Fed Chair Powell Speaks and US Consumer Price Index released monthly.

Having understood the global commodities performance over the past one week, taking cues from major global economic events, and based on technical analysis, noted below is the recommendation with the generic insights, entry price, target prices, and stop-loss for Crude Oil October Futures (NYMEX: CLV2) for the next 1-2 weeks duration:

Crude Oil October Futures Contract (NYMEX: CLV2)

Price Action and Technical Indicator Analysis:

NYMEX Crude Oil October Futures' prices took the resistance of the rising trendline on the upside and fell sharply from the higher levels. Recently the prices broke a horizontal support line by the downside and are sustaining below the breakdown level, indicating the possibility of a downtrend. Moreover, prices are trading below the 21-period and 50-period SMA on a weekly chart, further supporting the downtrend. The leading indicator RSI (14-period) is moving below the midpoint and showing a reading of ~42.48 levels, which indicates a weak trend.              

Now the next crucial support levels appear to be at USD 80.00 and USD 78.00, and prices may test these levels in the coming sessions (1-2 weeks). 

As per the above-mentioned price action and technical indicators analysis, Crude Oil October Futures (NYMEX: CLV2) 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 September 07, 2022 (Chicago, IL, USA 2.24 AM (GMT -5). 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.