Global Commodity Market Wrap-Up

Last week, the majority of commodity segments picked up an upside momentum due to weak dollar index prices. Besides, the fear of invasion in Ukraine by Russia amid Russian military build-up near Ukraine impacted the commodity market. Russia is keen to capture the strategic shale oil, gas and power sectors. It is noticeable that Ukraine became the crucial supply route for Russian oil and gas supply to European Union. Meanwhile, the gold and silver prices continued to show strength last week. Notably, Gold prices settled at a 1.09% weekly gain while silver prices settled at a weekly gain of 2.31%. Base metals were also supported by rising energy prices especially Nickel prices which made a fresh high after few months of consolidation. Notably, Lead and Copper prices witnessed the weekly gains of 3.32% and 0.69% respectively while zinc traded in a range with the weekly loss of -0.34%.

On the Energy front, Crude oil prices again made fresh new highs and settled at a weekly gain of 6.24%. The natural gas prices also broke its consolidation from lower levels and spiked fearing concerns over Ukraine Invasion news. Natural Gas settled at a weekly gain of 8.84%. While most of the Agricultural commodity prices traded in a range with Corn and Soybean prices settled at 1.73% and 2.87% weekly losses respectively while Sugar prices settled at a weekly gain of 1.44%.

In the recent week, most of the commodity prices started the weak with a positive tone while Base metals are facing some correction from higher levels. The Crude Oil and Natural gas are among the trending themes currently and continue to witness buying interest. Precious metals are also picking up the momentum as Silver prices are also getting good support from the lower levels.   

The upcoming macro events that may impact the market sentiments include an update on US Philadelphia Fed Manufacturing Index, US Unemployment Claims, Existing Home Sales, and The Conference Board Consumer Confidence 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 Silver Futures (COMEX: SIG2) and Soybean Oil Futures (CBOT: BOH2) for the next 1-2 weeks’ duration:     

Silver Futures Contract (COMEX: SIG2)

Price Action and Technical Indicator Analysis:

On the daily chart, COMEX Silver price broke the downward sloping trend line resistance and the prices are sustaining above the downward sloping trend line breakout line from the past two days. Moreover, the prices are trading above the trend-following indicator 21-period SMA, indicating positive momentum. Further, RSI (14-period) is trading at ~57.26 level, indicating bullish momentum. Now the next crucial resistance level appears to be at USD 24.40, 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 February Futures (SIG2) 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’ recommendations is as follows:

Soybean Oil Futures (CBOT: BOH2)

Price Action and Technical Indicator Analysis:

On the daily chart, Soybean Oil price broke the downward sloping trend line by an upside and the prices are also sustaining above the same from past two days. Moreover, the prices are trading above the trend-following indicators 21-period and 50-period SMA, further supporting bullish stance for the commodity. There is a positive golden 21-period SMA crossover over 50-period SMA that also gives buying indication in the commodity. The leading indicator RSI (14-period) is trading at ~61.25 level, indicating positive momentum for the commodity prices. Now the next crucial resistance level appears to be at USc 68.77, 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 Soybean Oil March Futures (BOG2) 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 given recommendation(s), the Entry Price is assumed to be at or above/ at or below a certain level. However, a slight deviation in the 'Entry Price' can be considered depending upon the upside/downside potential expected and taking into consideration the Target levels indicated. For example: - An Investor can consider entering the commodity at or above/ at or below a certain range (1%-1.5%) from the Entry Levels recommended depending upon the potential upside/downside expected. Therefore, there can be a slight deviation between the ‘Entry Price’ and the ‘Current Market Price (CMP)’. The ‘Entry Price’ indicated above may or may not be same as the ‘CMP’ shown in the price chart.

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 January 19, 2022 (Chicago, IL, USA 02.35 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.