Global Commodity Market Wrap-Up

Last week, the metals market showed a negative trend. Gold demonstrated some resilience, with a slight decline of -0.12%, while silver saw a more substantial drop of -3.30%. Base metals also experienced declines, with copper and zinc falling by -2.73% and -6.39%, respectively. Lead, however, was hit harder, registering a significant drop of -4.84%. This varied performance marks a stark contrast to the previous week's stability, indicating a shift towards more bearish sentiment in the market.

Last week, natural gas prices experienced a notable increase of 3.96%, indicating a shift in market sentiment that could be attributed to changes in supply dynamics or seasonal demand fluctuations. In contrast, crude oil prices fell significantly by 7.80%, reflecting a decline in market confidence. Meanwhile, in the agricultural sector, U.S. sugar prices dropped by 2.43%, adding to the mixed performance observed across various commodities.

Global commodity markets are facing a mixed outlook. Despite a recent decline from peak levels, major support levels are holding, indicating that bullish sentiment is still present. Precious metals are consolidating after their recent highs, while natural gas remains steady following a bounce-back from earlier lows. Crude oil, however, is showing signs of weakness, having broken through its support level. Conversely, agricultural commodities are trending lower, influenced by broader market fluctuations.

The upcoming Micro and Macroeconomic events that may impact market sentiments include an update on the S&P Global Initial Jobless Claims, Retail Sales, Fed Interest Rate Decision, FOMC Press Conference, Existing Home Sales.

Having understood the global commodities performance over the past 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 Nickel October Future (LME: CMNIV24) for the next 2-4 weeks duration:

Nickel October Future (LME: CMNIV24)

Price Action and Technical Indicator Analysis:

Nickel futures are showing signs of bullish potential as October prices maintain positions above key support levels. The daily chart reveals a consolidation phase near this support zone, accompanied by a bullish candlestick pattern, suggesting a possible reversal from recent lows. The Relative Strength Index (RSI) stands at 42.29, indicating potential upward momentum as it recovers from the oversold territory. Although prices are still below the 50-period Simple Moving Average (SMA), which serves as resistance, they are trading above the 21-period SMA, which provides support. This technical setup presents a cautiously optimistic outlook for nickel futures.

Now the next crucial resistance levels appear to be at USD 17200.00 and USD 17600.00, and prices may test these levels in the coming sessions (2-4 weeks).

As per the above-mentioned price action and technical indicators analysis, Nickel October Future (LME: CMNIV24) is looking technically well-placed for a ‘Buy’ rating. Investment decisions should be made depending on an individual’s appetite for downside 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 the ‘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

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 a 2-4 weeks’ time frame. This may be looked at by Individuals with sufficient risk appetite looking for returns within short investment duration. The investment recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the commodities has not been considered in the decision-making process. Other factors which could impact 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 12, 2024 (Chicago, IL, USA 00:00 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.