Commodity outlook by Tradebulls Securities: Buy gold, sell natural gas

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

Outlook:

US Dollar index is trading at 2 week high. Safe haven buying is seen as EURO and Pound are falling on their respective news. Currently, the story is of Risk-aversion which is making US dollar stronger. The rupee is getting stronger as we have seen a significant fall in crude oil prices. In fact, many of the emerging market currencies are getting stronger against Dollar because of slide in crude oil prices. The dollar index is re-visiting the 96.00 neighbourhood despite the weak performance of US yields purely on the back of weak Euro and Pound. Indian Rupee has support near 72.60-72.50 level and INR may find difficult to sustain below that level unless Brent Crude trades below sub $70.

Significant weakness in the dollar index is needed to rally gold. In spite of DXY trading at 2 weeks high, we are not seeing a similar correction in Gold because now safe haven support is coming into Gold. If recent ETF flows are any indication, gold investors are feeling better about the metal's intermediate-term prospects. Gold's rally is still being threatened by strength in the dollar. Last week we predicted that gold will trade above $1225 on back of positive sentiment and now we are seeing gold re-testing the $1240 resistance levels. From a technical standpoint, as long as the gold futures price remains above its 15-day moving average ($ 1217), the gold bulls will enjoy at least the benefit of immediate-term (1-4 week) price momentum

Buy Gold
Target: Rs 32,500
Stop loss: 31,750

Gold has taken multiple supports around 31800-31750 and has rebounded from those levels till 32300. Once again it has taken support around that level and is trading above 32000. It is clearly in bull trend as it is trading above its important 13, 20 and 50 day moving average on the daily scale. RSI_14 is comfortably above 61 level with no sign of divergence or exhaustion. We expect the rally and trend to continue and so we recommend long position with a target of 32500 and stop loss of 31750.

Sell Natural Gas
Target: Rs 222
Stop loss: Rs 237

Natural Gas is grinding lower after making top near 250.80. Any follow up near 244 is met by stiff resistance and it settles back around 230 levels. For past week it is trading in the range of 230-238 and any range breakdown will trigger fresh selling momentum. Natural Gas is trading below 13 day moving average and is near 20-day moving average. We recommend going short below 229 with an expected target of 222 and stop loss of 237.

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