Global Commodity Market Wrap-Up

Last week, most of the commodity prices traded in a range with weak tone mainly due to rising US Dollar Index. Meanwhile, Gold and Silver prices took correction from higher levels. Notably, Gold prices settled at a 0.90% weekly loss while silver prices settled at a weekly loss of 2.23%. Base metals also took some downside corrections from higher levels and settled in red. Last week, Copper and Lead prices witnessed weekly loss of 0.33% and 6.33% respectively.   

On the Energy front, Crude oil prices also took slight downside correction and settled at a loss of 4.71% while Natural gas prices are regaining upside momentum from key supporting levels and settled at a weekly gain of 5.43%. Agricultural commodity segment prices are showing range bound movement as Sugar and Corn prices settled at 0.10% and 1.13% weekly gains respectively while Soybean prices settled at a weekly gain of 1.53%.

Looking at the recent week, all the commodity segments recovered except precious metals which are witnessing slight  correction from higher levels. Precious metals also got impacted from rising dollar index prices. Now, the upcoming FOMC meeting minutes and 3^rd quarter second estimates for US GDP for 2021 might decide the future of the Precious and Base metal prices.  On the Energy front, Natural gas prices are trading above 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 continue to trade in a range with weaker tone.

The upcoming macro events that may impact the market sentiments include an update on US GDP 3^rd Quarter 2021 (Second Estimates), Natural Gas Inventories data, US Unemployment Claims, FOMC Meeting Minutes, and Pending Home Sales 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 Copper Futures (LME: CMCUF21) 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 Gas prices are sustaining above an upward sloping trend line support at USD 4.85 level. Moreover, the leading indicator RSI (14-period) is trading at ~56.22 level, which supports a positive stance. Further, 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 resistance level appears to be at USD 5.50, 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:

Copper January Futures (LME: CMCUF22)

Price Action and Technical Indicator Analysis:

On the weekly chart, LME Copper price broke the downward sloping trend line resistance at USD 9456 level on October 13, 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 positive momentum. Further, RSI (14-period) is trading at ~54.77 level, indicating bullish momentum. Now the next crucial resistance level appears to be at USD 10120, 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 Copper January Futures (CMCUF22) 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 24, 2021 (Chicago, IL, USA 02.45 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.