Outlook & trading strategies for Nickel, crude oil by Tradebulls Securities

There is a negative divergence in RSI_14 on Crude oil's daily scale

Gold bulls are catching a breather after a strong rally. This consolidation is necessary as gold was trading in the overbought zone. For gold, there is both good and bad news where the US is taking away special status of Hong Kong which gives gold some tailwind but supporting the risk on mood is the news of leading pharmacy showing robust results during third rounds of trial. Stronger-than-expected inflation figures released in the US on Tuesday helped gold prices as investors looked for hard assets as a way to protect against higher inflation. If you are a trader, you are simply looking for short-term pullbacks that you can take advantage of as value opportunities. Short-term support comes at 48,700 and any short term traders should exit their long positions below that level. Gold needs to break its immediate resistance of $1,815 and weakness may come below $1,790.

In MCX, Silver is at a 7-year high. Silver has breached $19 but the question is, will it sustain? On Monday, after breaching the level, it went below it but on Tuesday, higher inflation from the US brought Silver again above $19. There has been a historically high purchase of physical silver via silver exchange-traded funds in the past few months alone as of June 30, global holdings of silver in silver exchange-traded products, reached a fresh all-time high of 925 million ounces, which is roughly 14 months of mine supply. Silver looks bullish but we are reluctant to take any fresh position at this juncture. So, we are in a wait-and-watch mode. 

We believe the decision of OPEC+ on production cut tapering will set the tone for the oil market. OPEC+ leans towards easing cuts and market is discounting the factor that OPEC + may opt for production cuts from a drop from 9.7 mb/d to 7.7 mb/d, beginning in August. There is another concern that oil demand from retailers have peaked out. There is still room for demand from aviation but for retail consumers, this demand is as good as it gets with lockdown eased in the majority of the countries.

Natural Gas on daily NYMEX chart is making lower high and lower low indicating the trend still has bearish tone. In MCX, the rally from 111 to 144 is under threat if 127 is taken out which is 50 per cent of the retracement level. The issue for the Natural Gas market appears to be a near-term demand concern issue and storage worries.

Recommendation:

Sell Crude below 2,900 | TGT: 2,700 | Stoploss: 3,000

Crude oil is trading in a narrow range of 2,950-3,100 since June 30. There is a negative divergence in RSI_14 on a daily scale and crude has made ‘hanging man’ candlestick pattern on the top. However, crude has strong support around 2,900 so we are recommending going short only below 2,900 for expected downside move till 2,700 and stoploss of 3,000 on a closing basis.

Sell Nickel | TGT 978 | Stoploss: 1,038

Nickel has made a ‘hanging man’ candlestick pattern on a daily scale at the peak, followed by doji and negative candle. This shows that bulls have exhausted and prices may retrace back near 50-day moving average. Right now, price action is near 20-day moving average. There is also a negative divergence on RSI_14 on a daily scale pointing to correction in the near term. So, we would recommend going short with stoploss of 1,038 and the expected target of 978.
Disclaimer: Bhavik Patel is Sr. Technical Analyst (Commodities) at Tradebulls Securities. Views are personal.