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Global Commodity Technical Analysis Report

Commodity Prices Advanced, Buy Perspective on 2 Commodities – Soybean Oil, Lead

Oct 06, 2021

Global Commodity Market Wrap-Up

Last week, commodity basket showed some upward strength due to minor correction in Dollar index prices which is trading at 10-months high. Precious metals are still trying to find out positional direction and trading in a minute trading range. However, overall short-term trend seems bearish for Gold and Silver based on technical analysis. Last week, it seems speculative net long positions were cut in Gold by 19,248 net contracts to 1,68,399 contracts, according to the data published by Commodity Futures Trading Commission (CFTC) on 27th September 2021.

Base metals prices also traded in a mixed tone as Copper and Zinc prices witnessed loss of ~2.25% and ~4.86% respectively while Lead prices are trying to recover from lower levels and settled in a positive territory by ~0.38% on a weekly basis. Energy sector continuously outperformed the rest of the commodity segment as Crude oil prices surged by 2.57% while Natural Gas prices settled at 8.06% gains.

Agricultural commodities are still trading with a mixed bias. Notably, Corn and Sugar price settled in green at 2.80% and 0.65% respectively last week. However, Soybean prices declined by 3% on a weekly basis.     

In the existing week, most of the base metals and energy sector commodities are witnessing good upside momentum. Crude oil and Natural oil prices are trading near multi-year high levels. On the agricultural front, only Soybean oil complex are trading with a positive bias majorly supported by Crude Oil. Now, all eyes are on the monthly USDA WASDE report that might budge the prices to either direction.  Precious metals are currently trading with weak tone and the prices are expected to fall further in the coming weeks.

The upcoming macro events that may impact the market sentiments include an update on ADP Non-Farm Employment Change, US Unemployment Claims, US Unemployment Rate, and USDA WASDE Report 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 Soybean Oil Futures (CBOT: BOZ1) and Lead Futures (LME: CMPBV21) for the next 1-2 weeks’ duration:

Soybean Oil December Futures Contract (CBOT: BOZ1)

Price Action and Technical Indicator Analysis:

On the daily chart, CBOT Soybean Oil price broke out the downward sloping trend line resistance at USc 59.27  on October 05, 2021. Since the breakout, prices are sustaining above the downward sloping trend line. Moreover, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA, indicating a bullish trend. The leading indicator RSI (14-period) is trading at ~64.37 level. Now the next crucial resistance level appears to be at USc 65.70, 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 Soybean Oil December Futures (BOZ1) 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:

Lead October Futures (LME: CMPBV21)

Price Action and Technical Indicator Analysis:

On the weekly chart, LME Lead prices are trading in a rising channel pattern and sustaining above the lower band of the pattern. Moreover, stock prices are forming higher tops and higher bottoms, which indicates bulls are in action. Moreover, the prices are trading above the trend-following indicators 50-period SMA, indicating a bullish trend. The leading indicator RSI (14-period) is trading at ~48.13 level. Now the next crucial resistance level appears to be at USD 2275, 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 LME Lead October Futures (CMPBV21) 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 06, 2021 (Chicago, IL, USA 03.00 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.

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.