Commodity outlook by Tradebulls Securities: Sell Crude oil, Lead

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

The dollar index post US Fed FOMC meet has gained steadily and has breached 96 levels. Our currency is getting strong against dollar inspite of 25 basis rate cut but we don’t expect the currency to breach below 70.80 next week. On a daily scale, we have support emerging at 70.90 levels which 61.8 per cent retracement taken from high of 71.81 to 69.59. Buy on dips should be the strategy as long as 70.80 is not breached.

US securities and bonds are yielding so much more than the rest of the globe, so global investment is coming to the US. Hence, strong dollar which is pulling gold back prices in COMEX but in MCX because of a weak rupee, we are not seeing a significant pullback. Now, that dollar index is inching up, we are seeing some pullback in gold in COMEX but as long as $1290 is not breached, underlying fundamentals remain bullish. Above $1,320, we will again see gold prices accelerating so one should avoid taking short positions from here. Any serious correction is only expected below Rs 33,000 levels. Till then it is buy on dips and we may even see levels till Rs 33,800. Last Friday’s strong non-farm payroll of US is creating headwinds for gold as strong dollar usually limits gold’s upside.

In silver, looking at the longer-term picture, we have bounced from the 200-day exponential moving average (EMA), and now have both the 20-day EMA and the 100-day EMA above that level. It looks as if we were in a very nice trend to the upside. In MCX, we are seeing a fair bit of resistance near Rs 41,000 and the rally could derail below Rs 39,800. Gold looks more attractive than silver partly because of rupee factor and being not as volatile as silver. Intraday any dips can be bought into gold. Silver already has run up too much so for the long term we like it but for intraday or 1-2 days we would just wait and see.

Venezuela sanctions failed to lift crude oil prices as first everybody thought only US companies were not allowed to buy their oil but now like Iran, US is putting harsher sanctions. Buyers are still in control as crude is above its 200-DMA. Crude still needs more fundamental bullish factor to breach $64 in NYMEX and Rs 4,000 in MCX. We expect crude to make base near Rs 3,650-Rs 3,600 before resuming its uptrend.

Sell Crude Oil

TARGET: Rs 3,650 

Stop LOSS: Rs 4,000

Crude oil on the daily scale has resistance around Rs 4,000 levels where thrice it had failed to breach and sustain above that level. Sellers are getting active near that level so any long position should only be taken above that level. Meanwhile, we expect some consolidation to continue in crude oil. Since crude oil is trading near the upper end of the range, we expect crude oil to test the lower end of the range which comes around Rs 3,650 levels. Momentum indicator also shows that the upside trend has exhausted so sell crude oil with expected downmove till Rs 3,650 and stop loss of Rs 4,000 closing basis.

Sell Lead

TARGET: Rs 145.50 

Stop LOSS: Rs 151.20

Lead has made doji candle at the top followed by large bearish candle indicating the run up has exhausted. We are witnessing the pullback which is much needed for a lead in order to resume its uptrend. Cancelled warrant ratio shows that selling in lead has not abated. On a daily scale, Lead has breached its 200-DMA confirming reversal signal. We expect Lead to test levels of Rs 145.50 and one can short with stop loss of Rs 151.20.

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