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Global Commodity Technical Analysis Report

Commodities Segment Traded in a Mixed Tone, 2 Commodities in a Buy Range – Sugar, Gold

Oct 27, 2021

Global Commodity Market Wrap-Up

Last week, the commodity basket traded in a mixed tone as precious metals witnessed a rise in prices while Base metals saw a downward correction from higher levels. Precious metals showed some promising moves as gold prices are trading near its important $1800 resistance driven by weak dollar prices in the past couple of weeks. Besides, the rising yields on 10-year treasury notes which touched 5 months high levels also supported the upward move in Gold. Notably, Gold is considered as a hedging tool against inflation.

Precious metals settled at a 1.58% weekly gain while silver prices witnessed strong weekly gains of 4.71%. Base metals took some downside correction from higher levels as Zinc and Copper metals witnessed sharp weekly decline of 8.94% and 5.02% respectively.   

On the Energy front, Crude oil prices continued its upward movement and settled in green with a weekly gain of 2.48%. However, Natural Gas took some technical correction from higher levels and settled at weekly loss at 2.48%.

Last week, Soybean and Corn price settled in positive tone at 0.23% and 2.33% respectively. However, Sugar prices took sharp downside correction and declined by 3.64% on a weekly basis.     

In the existing week, precious metals reached its crucial support levels while base metals continue to trade in a range with a weak bias. Energy prices are trading in northward direction with Natural Gas took sharp upside momentum this week and Crude oil prices moved up slightly. On the agricultural front, Sugar, Soybean and Corn prices are up this week. Sugar and Corn prices are taking crucial support and moving in a upward trajectory till today.

The upcoming macro events that may impact the market sentiments include an update on GDP Advance Estimate, 3rd Quarter 2021, US Unemployment Claims, Core PCE Price Index, and US Treasury Currency Report released Half-yearly.

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 Sugar No. 11 Futures (ICE: SBH2) and Gold Futures (COMEX: GCZ1) for the next 1-2 weeks’ duration:             

Sugar No. 11 March Futures Contract (ICE: SBH2)

Price Action and Technical Indicator Analysis:

ICE Sugar prices are sustaining above an upward sloping trend line support level at USc 19.15 and continuously taking support of the same. Moreover, prices are moving in higher tops and higher bottoms formation. Now, the prices are consolidating at lower levels and moving up gradually. The leading indicator RSI (14-period) is trading at ~58 level indicating bullish momentum. Further, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA, which may act as a support level.  Now the next crucial resistance level appears to be at USc 21, 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 Sugar No.11 March Futures (SBH2) is looking technically well-placed for a ‘Buy’ rating. Investment decision should be made depending on an investors’ appetite on 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’ recommendation is as follows:

Gold December Futures (COMEX: GCZ1)

Price Action and Technical Indicator Analysis:

COMEX Gold futures is trading above the downward sloping trend line resistance at USD 1784.50 and taking support of the same on the weekly chart. Moreover, the prices are trading below the trend-following indicators 21-period 50-period SMA, which may act as a crucial resistance level. The leading indicator RSI (14-period) is trading at ~48.53 level. Now the next crucial resistance level appears to be at USD 1840, and prices may test that level in the coming sessions (1-2 weeks).      

Standard & Poor's Depositary Receipt (SPDR) Gold Holding Analysis:

SPDR is an exchange-traded fund issued by the Investment Management Group, State Street Global Advisors’, trading since 1993 on the American Stock Exchange (AMEX). SPDR holdings can be considered as a directional indicator of Gold prices. The gold ETF holdings at SPDR decreased by 0.21% to 978.07 tons for the week ending October 22, 2021 despite of moderate gains of ~1.60 % in the gold prices past week. Notably, Gold SPDR holdings declined by 17.5% YTD with the decrease in gold prices by 7.81% respectively. Normally, both the market indicators are highly correlated and typically move together. It is also notable that gold prices are continuously getting upside correction from lower levels despite the declining trend of the SPDR Gold holdings since March 2021  till date.

SPDR Holdings versus COMEX Gold Prices

As per the above-mentioned price action and technical indicators analysis, we can conclude that Gold December Futures (GCZ1) is looking technically well-placed for a ‘Buy’ rating. Investment decision should be made depending on an investors’ appetite on 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 recommendation(s), the Entry Price is assumed to be at a certain level with a slight deviation on either side. A slight deviation (Example 1.0%-1.5%) on either side in the ‘Entry Price’ can be considered depending upon the upside or downside potential expected and also taking into consideration the Target 1 levels and Stop-loss levels.

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 October 27, 2021 (Chicago, IL, USA 03.59 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.


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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