Commodity outlook by Tradebulls Securities: Sell crude oil, copper

Commodity outlook and trading ideas by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls:

Outlook:

US Dollar index has challenged the top of 97 and since retraced back. The primary reason for retrace back was strength in Pound after positive news of Brexit came. Also, previously Dollar index has faced resistance near 97. Meanwhile, Indian Rupee is trading stronger thanks to weak Dollar. Volatility has increased after a verbal spat between RBI and government. USDINR is still not out of the woods but weak crude oil price is giving support to our currency.

Technically, gold bulls have the slight near-term technical advantage if they managed to sustain above $1232 level. Bears next near-term downside price breakout objective would be pushing gold prices below $1200. Gold is oscillating between these two ranges. In India, domestic gold prices have rallied to six-year highs amid higher global prices and a depreciation of the rupee. One of the positive factors for gold is there is an increase in physical demand for gold both from ETFs and Central banks. Several Central banks like Russia, China, Kazakhstan, Poland and Hungary have bought gold this month.

Brent Crude oil is trading below its 200 DMA around $75. Currently, there is a positive correlation between stocks and crude oil prices. Fears of the global economic slowdown could be the reason behind this positive correlation. There is bullish factor hanging on crude oil and that is Iran sanctions. Recently there is an increase in oil inventory in the US which is pushing the prices down. The strong buildup in oil inventories is likely to keep crude oil prices down in short term. We expect Brent to test support of $72 before bouncing back above its 200 DMA.

Sell Crude 

Target: Rs 4,650 

Stop loss: Rs 4,975

Crude has broken its previous swing low of 4850 and is clearly in the bearish trend. It is trading below 13, 20 and 50-day moving average confirms the bearish trend. 4650 is the next support zone which is 200 DMA on the daily scale. RSI_14 is also confirming bearish stance as it is trading below 50. We expect Crude to bottom out around 4650 as it will take the support of its 200 DMA and RSI will be in the oversold territory then. So we recommend a short position with expected down move till 4650 and stop loss of 4975.

Sell Copper 

Target: Rs 428 

Stop loss: Rs 440

Copper is trading below 200 DMA which indicates that long-term trend is negative. It is making rounding top chart pattern on daily scale whose chart pattern target comes around 423. ‘Bearish belt hold’ candlestick formation followed by negative candles indicates that selling pressure is likely to continue. So we recommend short position with expected target of 428 and stop loss of 440 which is above 200 DMA.

Disclaimer: The analyst may have positions in any or all the commodities mentioned above.