Global Commodity Market Wrap-Up

Last week, most of the commodities took moderate correction. Meanwhile, overall, the commodity prices are trading in a range with a positive bias. Precious metals primarily gold is continuously getting upside momentum. Dollar index prices also trading in a range from past couple of weeks with weak bias. Notably, Gold prices settled at a 1.84% weekly gain while silver prices settled at a weekly gain of 0.87%. Base metals witnessed weaker tone mainly due to sharp fall in coal prices. Notably, the recent increase in coal prices created supply shortage resulting in higher energy cost for smelters. Moreover, Zinc and Lead prices witnessed weekly decline of 5.02% and 2.09% respectively.   

On the Energy front, Crude oil prices are trading in a range while settled last week with a loss of 2.75%. Natural Gas moved up slightly and settled at a weekly gain of 1.66%.  Agricultural segment also traded in a mixed tone with Soybean and Corn prices settled in red at 3.52% and 2.68% respectively while Sugar prices settled in green up by 3.48% on a weekly basis.     

In the existing week, precious metals are continuously recovering from lower levels while base metals are also sustaining above its crucial supporting levels. On the Energy front, Crude oil price is trading in a range while Natural gas prices declined sharply. On the agricultural front, Soybean and Corn prices showed some positive moves. Meanwhile, overall Commodities demand seems to be at a higher side amid recent Chinese notification to its citizens to keep a stock of necessities as COVID control tightens coupled with expectations of long winter season.

The upcoming macro events that may impact the market sentiments include an update on Consumer Price Index data, US Unemployment Claims, JOLTS Job Openings, and US Industrial Production 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 Silver Futures (COMEX: SIZ1) and Corn Futures (CBOT: CZ1) for the next 1-2 weeks’ duration:           

Silver Futures Contract (COMEX: SIZ1)

Price Action and Technical Indicator Analysis:

COMEX Silver prices are sustaining above the horizontal trend line support level at USD 22.18 and continuously taking support of the same on the weekly chart. Moreover, prices are trading above the upward sloping trend line support zone. However, the prices are trading below the trend-following indicators 21-period SMA and 50-period SMA, which may act as a resistance level. The leading indicator RSI (14-period) is trading at ~49.19 level indicating bullish momentum. Now the next crucial resistance level appears to be at USD 25.48, 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 Silver December Futures (SIZ1) 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:

Corn December Futures (CBOT: CZ1)

Price Action and Technical Indicator Analysis:

On the weekly chart, CBOT Corn price witnessed a breakout of the descending triangle pattern at USc 548 level on October 27, 2021. Moreover, prices are sustaining above the triangle pattern breakout level. Besides, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA, indicating a positive trend. The leading indicator RSI (14-period) is trading at ~54.79 indicating bullish momentum. Now the next crucial resistance level appears to be at USc 594, 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 Corn December Futures (CZ1) 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 November 10, 2021 (Chicago, IL, USA 02.15 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.