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Global Commodity Technical Analysis Report

Mixed Sentiments Visible in Commodities Trading, 2 Commodities under Radar - Silver, Sugar

Jun 09, 2021

Global Commodity Market Wrap-Up

Commodity prices witnessed mixed sentiments last week as the precious metals and base metals prices took sharp correction from higher levels considering growing concerns related to the weak industrial demand from China and rise in US Dollar Index. Meanwhile, the Energy sector showed significant rally last week and clearly outperformed other commodities. Agriculture-sector majors like soybean, corn, and wheat also rose last week.        


This week precious metals seems to trade in a tight range. Base metal segment took recovery after a sharp fall in prices last week, while the agriculture commodities prices have started the week on a bearish note.

The upcoming macro events that may impact the market sentiments include an update on Consumer Price Index, Crude Oil Inventory, WASDE Report and Unemployment Claims released weekly.

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 July Futures (COMEX: SIN1) and Sugar No. 11 July Futures (ICE: SBN1) for the next 1-2 weeks’ duration:

Silver July Futures Contract (COMEX: SIN1)

Price Action and Technical Indicator Analysis:

COMEX Silver Futures' prices witnessed selling pressure from the higher levels.  Currently, prices are facing strong resistance of its falling trend line at USD 28.58 level on the daily chart. Prices recently, broke out the upward sloping trend line support at USD 27.92 level on June 03, 2021. Since the breakout, prices are sustaining below the trend line which indicates the possibility of a reversal in the trend to the downside.

Moreover, the prices are trading below the trend-following indicator 21-period SMA, indicating a negative trend. The momentum oscillator RSI (14-Period) is trading at ~52.62 level, which supports a bearish stance. Now the next crucial support level appears to be at USD 25.54, 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 July Futures (SIN1) is looking technically well-placed for a ‘Sell’ 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 ‘Sell’ recommendation is as follows:

ICE Sugar No. 11 July Futures (ICE: SBN1)

Price Action and Technical Indicator Analysis:

Sugar No. 11 July Futures' prices witnessed a significant rally from low of USc 14.67 made on 01 April 2021 to the recent high of USc 18.25 tested on 12 May 2021, a gain of ~24.40 percent in the last 1 month. Currently, prices are trading in a rising wedge pattern on the daily chart. Prices are currently consolidating and continuously taking support of the 21-period SMA that further indicates prices might head towards the upper band of the rising wedge pattern.

Meanwhile, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA. The leading indicator RSI (14-period) is hovering at ~56.62 levels which supports the bullish stance. Now the next crucial resistance level appears to be at USc 18.53, and prices may test that level in the coming sessions (1-2 weeks).

Global Sugar Supply and Demand Scenario (2021-22):

USDA has increased the world sugar production estimate for 2021-22 by 6 million tons to 186 million tons in its May 2021 estimate due to higher production in India and Thailand which has offset the impact of decline of sugar production in Brazil.  Meanwhile, Global sugar production estimates has fallen by 2 million tons to 179.9 million tons for the marketing year 2020-21, as per the May 2021 USDA estimates.

Notably, Brazil sugar production is likely to fall by 5% to 39.9 million tons for Marketing year 2021-22 due to dry weather conditions and fire incident in the cane fields which lowered the sugar cane volumes available for crushing. Besides, moderate rise in grain prices also led the farmers to plant soybean and corn over sugarcane for the current marketing year.  India, the second largest sugar producer followed by Brazil, is likely to produce 34.7 million tons that is 3% higher compared to prior year mainly due to favorable weather conditions, according to the USDA report. Thailand sugar production is likely to rebound by 3 million tons to 10.6 million tons due to higher cane yields thanks to favorable weather conditions.

As per the above-mentioned price action and technical indicators analysis, we can conclude that Sugar July Futures (SBN1) 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 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 in a range. However, a slight deviation on either side in the ‘Entry Price’ can be considered depending upon the potential expected or indicated.

Note: 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 June 09, 2021 (Chicago, IL, USA 04:30 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.