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Global Commodity Technical Analysis Report

Metals & Mining Outshines Commodity Segment, 2 Commodities in a Buy Range – Copper, Natural Gas

Oct 20, 2021

Global Commodity Market Wrap-Up

Overall commodity prices surged globally last week driven by ease in dollar index prices from recent highs. Besides, concerns around growing shortage of commodities and higher inflation urged the market participants to accumulate commodities for hedging. Precious metals are gaining upside momentum as silver prices witnessed its 3rd consecutive weekly gains and settled at 2.84% weekly gain. Yellow metal also settled in green with 0.62% weekly gains. Base metals outshined last week as Zinc and Copper metals witnessed sharp weekly gains of 21.32% and 10.11% respectively. Notably, base metals producers faced  power issues due to rising energy shortages such as coal, and natural gas.

On the Energy front, Crude oil prices continued its bullish tone with the overall weekly gain of 3.77%. However, Natural Gas took some technical correction from higher levels and settled at a marginal loss of1.93%.

Last week, increased production data estimates by USDA WASDE report weighed on the agricultural commodity prices. Notably, Soybean and Corn price settled in negative zone at -2.03% and -0.90% respectively. Sugar prices also felt the heat and declined by 2.41%.     

In the current week, precious metals continue to trade in an upward trajectory while base metals are getting small correction after a good show last week. Energy prices are trading in a mixed tone with Crude oil prices trading at higher levels while Natural oil prices took correction to reach strong support zone.

The upcoming macro events that may impact the market sentiments include an update on Philly Fed Manufacturing Index, US Unemployment Claims, Natural Gas Inventories, 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 Copper Futures (LME: CMCUZ21) and Natural Gas Futures (NYMEX: NGZ21) for the next 1-2 weeks’ duration:              

Copper December Futures Contract (LME: CMCUZ21)

Price Action and Technical Indicator Analysis:

LME Copper Futures is trading above the rising trend line support level at USD 9500 and continuously taking support of the same. Moreover, prices are moving in higher peaks and higher troughs, which indicates bullish trend . The leading indicator RSI (14-period) is trading at ~58.65 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 zone. Now the next crucial resistance level appears to be at USD 10580, and prices may test that level in the coming sessions (1-2 weeks).               

LME Copper Warehouse Inventory (MCU-STOCKS) Vs LME Copper Continuous Price (CMCUc1)

Copper inventories in Warehouse have declined sharply from August 2021 onwards that fired up the copper prices in recent times. Notably, Copper inventories data stood at 1,72,025 tons on 19th October 2021 down from higher levels of 254,800 tons made on 20th August 2021 in LME Warehouses. Now, the copper stocks are moving down as per the above chart that might support the copper prices in the coming weeks.

As per the above-mentioned price action and technical indicators analysis, we can conclude that Copper December Futures (CMCUZ21) 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:

Natural Gas December Futures (NYMEX: NGZ21)

Price Action and Technical Indicator Analysis:

Natural Gas prices are currently trading in a primary upward trend and prices took some correction from the higher levels of USD 6.466 made on October 06, 2021. NYMEX Natural Gas prices are currently trading above the horizontal trend line crucial support level at AUD 4.85 and continuously taking support of the same. The leading indicator RSI (14-period) is trading at ~47.58 level. Moreover, the price is trading above the trend-following indicator 50-period SMA, which indicates bullish momentum in the commodity. Now the next crucial resistance level appears to be at USD 5.80, 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 Natural Gas December Futures (NGZ21) 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 20, 2021 (Chicago, IL, USA 03.36 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.