Commodity outlook by Tradebulls Securities: Buy lead, natural gas

Commodities outlook & stock recommendations by Bhavik Patel - Sr. Technical Analyst (Commodities), Tradebulls Securities

Indian rupee has been on a downward spiral after India’s disappointing index of industrial production (IIP) number last week. On November 13, the Indian rupee broke the 72 level after retail inflation came more than expected and above RBI’s target of 4 per cent. Retail inflation came at 4.68 per cent on the back of a rise in food inflation because of erratic monsoon. On November 14, the rupee did manage to stage a comeback but it was short lived. It seems we will see weak rupee going forward as it has broken its range of 71.60-70.80. We expect rupee to trade near 72.10 levels with downside capped at 71.40 and upside capped at 72.80.

Bullion counter is witnessing some short covering at lower levels. Gold prices were flat on Wednesday as investors stayed cautious after a much-awaited speech by US President Donald Trump in which he gave no details on the signing of a trade deal with China. Weak rupee helped gold in bouncing from levels of 37,500 to 37,900. In COMEX, gold needs to break $1,472 while in MCX 38,600 is strong resistance as it has made not breached that level since October 3. We expect current short covering to come till 38,200 but closing above 38,250 will give us confidence to go long.

In silver, 44,700-44,800 was the previous support that silver breached and now it has become resistance. Sustained closing above 45,200 is needed for long conviction otherwise it is short covering and we would recommend sell on rise.

Crude oil may witness profit booking at higher levels. Oil prices dipped on Wednesday as prospects for a trade deal between the United States and China dimmed, weighing on the outlook for the global economy and energy demand. Hedge funds are bullish in oil counter as they continue to buy oil derivatives last week. In MCX, 4,160-4,200 is where immediate resistance is and crude needs to break that resistance zone. Breaching above 4,200, we can see crude testing levels till 4,330. 3,980 is proving to be strong support as twice crude oil has bounced from that level so any long position can be maintained with stoploss of 3,980.

Recommendations

Buy Natural Gas | TGT Rs 202 | Stoploss Rs 182

Natural Gas has made head and shoulder formation pattern on the daily scale. The neckline comes at 183 and only below 183 can we see bullish trend under threat. Currently Natural Gas is taking support at its 20 day moving average. RSI_14 has shown no divergence and is trading above 55 which is bullish. Natural Gas is trading above all important moving average so we recommend long position at current levels with expected target of Rs 202 and stoploss near the neckline at Rs 182.

Buy Lead near Rs 153 | TGT Rs 158 | Stoploss Rs 150

Lead continues to trade in range of 153-158. This rangebound movement is seen since July and now the price action is near to the lower end of the range. It is a contrarian call as the short term trend is negative since lead is trading below 20 and 50 day moving average. RSI_14 also is at 43 so caution is needed for long position but looking at the range bound movement, we recommend long in lead near its support area of Rs 153 with target of upper end of the range i.e. at Rs 158 and stoploss of Rs 150 closing basis.

Disclaimer: Author may or may not have positions in the above mentioned stocks