Global Commodity Market Wrap-Up

Last week, most of the commodities continued to trade in a declining trend driven by the rising cases of the new COVID-19 variant Omicron. Besides, the stagnant dollar index prices at higher levels, heavy fall in Crude oil prices, and Natural oil gas prices recently created margin shortfall that also impacted commodities’ net long position for investors. Meanwhile, the gold and silver prices are consolidating with a weak tone impacted by signals from FED to increase interest rates faster than expected to counter the rising inflation rate. Notably, Gold prices settled at a 0.20% weekly loss while silver prices settled at a weekly loss of 2.86%. Base metals continued to trade in a range while Copper and Zinc prices witnessed the weekly loss of 0.93% and 1.45% respectively

On the Energy front, after a significant downfall in Crude oil prices from higher levels, prices took crucial support on a monthly chart and settled at a loss of 2.77%. The natural gas prices fell drastically and came down to 4 months low due to mild weather forecasts in the US impacting the demand for the commodity.  Natural gas settled at a weekly loss of 24.56%. Agricultural commodity prices are continuously showing range bound movement as Corn and Sugar prices settled at 0.13% and 3.10% weekly loss respectively while Soybean prices settled at a weekly gain of 1.16%. Soybean oil prices are trading in a correction phase and seem technically weak for the next couple of trading sessions.

In the recent week, commodity prices are trying to recover from lower levels majorly following crude oil prices which have sharply recovered from lower levels which is also the key monthly support level. Precious metals are trying to move in a range while Agri-commodities might show some volatility near the upcoming WASDE report.

The upcoming macro events that may impact the market sentiments include an update on JOLTS Job Openings data, Natural Gas Inventories data, USDA WASDE report, and Consumer Price Index 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 Natural Gas Futures (NYMEX: NGF22) and Soybean Oil Futures (CBOT: BOF2) for the next 1-2 weeks’ duration:

Natural Gas Futures Contract (NYMEX: NGF22)

Price Action and Technical Indicator Analysis:

On the weekly chart, NYMEX Natural prices are taking support of the downward sloping trend line and sustaining above the trend line level. Moreover, the momentum oscillator RSI (14-period) is trading near an oversold zone at (~38.95 level) which might indicate the possibility of a rebound in the commodity. However, the prices are trading below the trend-following indicators 21-period SMA and 50-period SMA, which may act as a resistance zone Now the next crucial resistance level appears to be at USD 4.74, 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 January Futures (NGF22) is looking technically well-placed for a ‘Buy’ rating. Investment decision should be made depending on an investors’ appetite for 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:

Soybean Oil January Futures (CBOT: BOF2)

Price Action and Technical Indicator Analysis:

On the weekly chart, CBOT Soybean Oil price broke out an upward sloping trend line support at USc 58.40 level on November 29, 2021 and sustaining below the trend line. Moreover, the prices are trading below the trend-following indicator 21-period SMA, indicating negative momentum in the price. Further, the leading indicator RSI (14-period) is trading at ~45.85 level, indicating bearish momentum. Now the next crucial support level appears to be at USc 51.19, 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 January Futures (BOF2) is looking technically well-placed for a ‘Sell’ rating. Investment decision should be made depending on an investors’ appetite for 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 ‘Sell’ 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 December 08, 2021 (Chicago, IL, USA 03.10 AM (GMT -6). 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.