Commodity outlook by Tradebulls Securities: Buy zinc, sell nickel

Commodities Outlook & Stock recommendation by Bhavik Patel - Sr. Technical Analyst

Rupee: In spite of strong Indian equity market, Indian rupee is following footsteps of Chinese offshore Yuan. Also one of the reasons for depreciating rupee is surge in US Dollar. US-China is near to signing phase one trade deal which has again put market in risk on mode. Chinese offshore Yuan slipped below 7 per dollar has again depreciated to 7.01 today so we expect rupee to trade weak. Rupee is confined in the range of 71.40-70.70 and we expect rupee to trade in narrow range going forward.

Gold is losing its safety bid after US service sector accelerated in October. More Fed rate cut will not be necessary as details showed most of the major sub-indices improving including business activity, new orders and employment. Gold has strong resistance around 38620-38650 as from 3rd Oct, it is unable to break that level. 37800 is the support where twice gold has taken support on 22 and 29 Oct. So any long position can be maintained till 37800 is not breached and on the upside expect gold to face resistance near 38250-38300. Silver had been trading in a $17 to $18 per ounce range for most of October. Silver had yesterday breached its recent swing low of 45500 and if it manages to close below it, we feel silver will test the level till 45000-44800. We are more bearish in silver than gold and selling pressure will increase below 44800 where silver had taken support in the month of Oct. Upside looks capped till 46200.

Crude oil saw much needed correction from 4099 after US inventory came more than expected. However, going forward we don’t expect US production to churn out at fast pace as Baker Hughes reported fewer oil rigs operating in US supporting thesis that money is now tight. Interestingly, Saudi Arabia is going forward with its IPO. That has led to speculation that there might be deeper production cuts announced at OPEC+'s meeting in December. Brent Crude oil has managed to trade above 200 DMA but continues to trade in the range of $64-$58 and has come near higher end of the range. Two week ago, I did suggest that Natural gas generally sees upside spike before start of the season and one should go a long with target of 195. The peak season for demand is almost here. While the conditions aren't as bullish as the ones we saw in November last year, this year's cold blast will be plenty cold. We expect Natural Gas to dip around 195 before resuming its uptrend till 208. We expect $3 but it would be bumpy ride as volatility will rise.

Recommendation:

Sell Nickel: TGT 1130 Stoploss 1205

Nickel has given sell cross over on daily scale by 20 and 50 moving average. RSI_14 is below 50, currently trading at 41 so trend is bearish. Since past 3 trading session, Nickel is trading below 5 day moving average which indicates short term trend is also bearish.  Nickel had already broken previous swing low of 1188 and now is close to next support of 1159. We expect the downside to continue so we recommend sell with expected downmove till 1130 and stoploss of 1205

Buy Zinc: TGT 193 Stoploss 187

Zinc on daily chart has made rounding bottom chart pattern and has breached its previous swing resistance of 189.80. The recent swing low of 187.10 was supported by 20 and 50 day moving average. Price action is above 5, 20 and 50 day moving average suggesting trend is bullish in all time frames. The bottoming out pattern is finished and now Zinc is expected to inch towards 193 so buy at current levels with stoploss below recent swing low of 187.10.

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Disclaimer: Views expressed are the author's own. He may have positions in one or more stocks.