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Global Commodity Technical Analysis Report

Precious Metals Outperforms Other Commodities, Technical Insights on 2 Commodities – Crude Oil, Soyb

Nov 17, 2021

Global Commodity Market Wrap-Up

Last week, all the major commodity prices rallied despite the strong US Dollar Index which traded at its 16 months high.  Gold and Silver outperformed other commodities driven by the recent rise in the US bond yield due to inflationary pressure. Notably, Gold prices settled at a 2.85% weekly gain while silver prices settled at a strong weekly gain of 4.92%. Base metals are currently trading in a range. Metal prices are not picking up the strength mainly due to sharp fall in coal prices. Last week, Copper and Lead prices witnessed weekly gain of 2.02% and 0.80% respectively.   

On the Energy front, Crude oil and Natural gas prices took some technical downside correction and settled at a loss of 0.55% and 13.14% respectively. Agricultural segment reflected upside momentum as Soybean and Corn prices settled in a positive territory with 3.21% and 4.39% gains respectively while Sugar prices traded in a range and settled at a weekly gain of 0.35%.

Recent WASDE report indicates a fall in the US Soybean production by 23 million bushels to 4.42 billion bushels for 2021-22 marketing year due to lower yields. In the report, Global Soybean production also declined by 1.1 million tons to 384.00 million tons due to decline in the US and Argentinian Soybean production which stands at 49.5 million tons for 2021-22.    

Considering the recent week, precious metals took a pause after a sharp rise in prices while base metals are still trading in a range with weak tone. On the Energy front, Crude oil prices broke its crucial support levels and might head towards its 21-period SMA on a daily chart. Though Natural gas prices are trading above its key support levels and showing decent upside movement from lower levels. Among agricultural commodities, Soybean prices are trading in an upside trajectory while Corn and Sugar prices are trading in a range with weaker tone.

The upcoming macro events that may impact the market sentiments include an update on Crude Oil Inventories data, US Unemployment Claims, Treasury Currency Report, and US Richmond Manufacturing Index 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 Crude Oil Futures (NYMEX: CLF2) and Soybean Futures (CBOT: SF2) for the next 1-2 weeks’ duration:             

Crude Oil Futures Contract (NYMEX: CLF2)

Price Action and Technical Indicator Analysis:

On the daily chart, NYMEX WTI Crude Oil price broke out an upward sloping trend line support at USD 79.70 level on November 16, 2021. Since the breakout, prices are sustaining below an upward sloping trend line. Moreover, the leading indicator RSI (14-period) is trading at ~48.49 level, indicating negative momentum. However, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA, which may act as crucial support zone. Now the next crucial support level appears to be at USD 74.77, 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 Crude Oil January Futures (CLF2) 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. Technical summary of our ‘Sell’ recommendation is as follows:

Soybean January Futures (CBOT: SF2)

Price Action and Technical Indicator Analysis:

On the daily chart, CBOT price broke the downward sloping trend line resistance at USc 1252 level on November 15, 2021 and is sustaining above the downward sloping trend line. Moreover, the prices are trading above the trend-following indicators 21-period SMA and 50-period SMA, indicating bullish momentum in the commodity. Further, RSI (14-period) is trading at ~55.67 level, indicating positive momentum. Now the next crucial resistance level appears to be at USc 1306, 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 January Futures (SF2) 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. 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 17, 2021 (Chicago, IL, USA 03.23 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.


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.