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Global Commodity Technical Analysis Report

Rising Dollar Index Restrained Commodities Bull Run, 2 Commodities to Watch Out – Coffee, Crude Oil

Aug 11, 2021

Global Commodity Market Wrap-Up

Last week, Commodity prices traded with a mixed tone as precious metal prices took sharp downside correction. Meanwhile, all base metal prices also felt the heat due to fall in precious metal prices. On the Energy front, natural gas continued its bull run and witnessed weekly gains of 5.77%, while Crude oil prices tanked with weekly losses of 7.67%. Rising dollar index prices, and recent foreign travel restrictions by China amid new COVID-19 cases weighed on the overall commodity prices.   

Agricultural commodities witnessed an upside last week as Sugar and Corn prices were trading with a positive bias while Soybean prices settled in red slightly. The upcoming WASDE report scheduled on 12th August 2021 might provide further direction to the agricultural commodity segment.

In an ongoing week, precious metals extended its price weakness. However, base metals are showing positive signs after a sharp decline last week. The energy segment looks further weak with Crude oil and Natural gas showing negative price movement in the current week. However, Agri commodities showcased mixed price reactions.  

The upcoming macro events that may impact the market sentiments include an update on Crude Oil Inventories, US Unemployment Claims, USDA WASDE Report, and US Retail 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 Coffee Futures (ICE: KCU1) and Crude Oil Futures (NYMEX: CLV1) for the next 1-2 weeks’ duration: 

Coffee September Futures Contract (ICE: KCU1)

Price Action and Technical Indicator Analysis:

On the weekly chart, ICE Coffee Future prices have been under pressure from the high of USc 215.20 to a recent low of USc 171.60 level made on 02 August 2021. After this massive sell-off, prices are continuously sustaining above an upward sloping trend line and taking support of the same. Moreover, prices are trading above the trend-following indicators 21-period SMA and 50-period SMA. The leading indicator RSI (14-Period) is trading at ~65.64 levels, indicating bullish momentum in the commodity. Now the next crucial resistance level appears to be at USc 196, 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 Coffee September Futures (KCU1) 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:

NYMEX Crude Oil October Futures (NYMEX: CLV1)

Price Action and Technical Indicator Analysis:

NYMEX Crude Oil Futures is showing some weakness on daily chart after the prices broke an upward sloping trend line. Black gold prices are now sustaining below the breakout level from the past six days. The trend indicator 21-period SMA gave negative crossover of 50-period SMA which also changed the price momentum to downside. Prices are getting downside momentum with good volumes further indicates active sell-off in the commodity. Moreover, prices are trading below the trend-following indicators 21-period and 50-period SMA, indicating our bearish stance. The leading indicator RSI (14-period) is trading at ~45.25 level further indicating that the prices are trading with weak momentum. Now the next crucial resistance level appears to be at USD 64.00, 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 NYMEX Crude Oil October Futures (CLV1) 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. 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 August 11, 2021 (Chicago, IL, USA 03.30 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.