Category Archives: Commodity

Technical Analysis on commodities like, Gold, Silver, Zinc, Nickel, Soybean, SoyOil, and many others

Technical analysis on Crude Oil

Crude Oil as on 10 Apr’13 – 5140

It’s almost a year to complete, Crude Oil is moving in Triangle formation. After giving an initial breakout in last week, prices corrected further and reentered within triangle formation. In the first instance move appears to be false breakout.

Crude Oil as on 10 Apr’13 – 5140

Crude Oil as on 10 Apr’13 – 5140

As depicted in above chart, prices moved higher after testing its long term moving average and in last few days prices are correcting a bit, but still prices holds above its 50-day EMA, and also on the downside it has support from its average.

Momentum oscillator RSI (14) also holds above 40 level, so it gives possibility of positive turnaround in prices.

Trading Strategy-

Combining above technical observation, traders can go long once prices move above 5180 level with stop loss below 5050 level. If prices hold above 5200 mark than I sense prices will move to retest recent high of 5517 and gradually move higher. But go slow & steady.

 

Technical analysis of Gold

Gold as on 22 Feb'13 - USD 1581

Gold as on 22 Feb’13 – USD 1581

In the International market Gold is falling due to variety of reasons, there are much strong fundamental news flowing around, but I would like to draw your attention towards some simple technical observations.

As you can see in above attached chart that, Gold is falling in a channel line from beginning of Oct’12, and in last week only it gave sharp dip below lower channel line, which was indicative of strong selling pressure (I would not discuss any fundamental news attached). Channel has validated its authenticity in past, so if prices moves again in the channel line, than it is one signal where we can go long in Gold, but you can’t expect prices to touch upper channel line this time.

Secondly, momentum oscillator RSI (14) has reached historical low of 20, I have marked with red circle in chart. By this, please don’t expect bounce in prices, as prices have tested oversold territory, No. In past very few time RSI has tested this level in Gold chart, and whenever it has tested this level, prices consolidated and moved slightly lower. Confused, let me clear. From here on, prices may consolidate further and it is possible that after normalizing momentum we might see one more dip in price, but such dip should be utilized as a buying opportunity, by looking at divergence between Price and RSI, I hope I made it very clear. You have to keep little patience here to grab right opportunity.

Few of my friends must be betting that prices will retest its low of USD 1527 made in May’12, but does it make any difference, whether prices test this level or not, major damage is already done.  This time prices made a low of USD 1555.

I would not recommend to place stop loss below this level and take a long position, although it looks good, but I sense that we might see one more dip in price, and that should be utilized, by looking at price pattern at that point in time. Yes, aggressive traders can take minor longs as and when prices move above this channel line, which is coming near USD 1590 (prices should give close above this level and stay).

Lastly, on broad level, I don’t expect Gold to ride further and even testing its Major High near USD 1930.  Gold has shifted its range, expect it to stay consolidate to weak.

I welcome all your feedback and suggestions.

 

ZINC – Still sometime to go short??

As most of the commodities are relaxing after last one and half months rally.  Similarly Zinc 1 month MCX contract is moving flat from last few days.  As on 28 Dec, 2012 Zinc closed at 111.35.  Last few days back it broke from its rising trendline, but as such we have not seen any follow through action barring few choppy sessions, but in last session prices has engulfed last fourteen trading sessions price movement and closed in red, at first instance which indicates that Bears are active now.  Momentum is fading to support the basis.  Based on above observations, I sense that if we see follow through action on Monday, than Zinc has potential to go down further.

ZINC - 111.35

                                                          ZINC – 111.35

I am little skeptical only because of Christmas & New year holiday in US.  Traders can take short position keeping trading stop loss of 113.40, with an initial target o 108.

 

ALUMINIUM – 111.60

As on 28th Dec, 2012 Aluminum 1 Month MCX contract closed at 111.60.  Here I see a minor selling opportunity for risk takers & aggressive traders, risk-averse can excuse at this point in time.  I am saying because I am little late in tapping the opportunity.

Technically, prices has broken out from one and half month rising trendline, and momentum is deteriorating.  MACD is already trading with bearish convergence and RSI is tilted downwards, indicating weakness in prices.

ALUMINIUM

Traders can short on rise or at CMP keeping stop loss of 113.40, if prices breaks below level of 111.10 than prices can move towards 109.50 and lower, and if not than prices can reverse the trend and continue to move higher.  As of now, I see selling opportunity with keeping strict stop loss.

NICKEL – 957.80

Nickel, after one and half months rally from low of 852 to high of 980, showing an initial sign of waning.  As we can see in below attached chart that, recently Nickel has broken its one and half month rising trend line.  Secondly, momentum oscillator MACD has given Bearish Convergence on daily chart, as well we can see that RSI is trading almost flat from last few days.  This gives us initial sign that momentum is waning, and if you are holding long Nickel than better book your partial profits here.  Confirmation of weakness comes in as and when Nickel close below 950 levels, and this will be the point where we like to go short in the counter, strategy should be taken according to risk appetite of individuals.

NICKEL AS ON 21 DEC 2012

NICKEL AS ON 21 DEC 2012

Why Prices of Gold not falling in Indian Market???

Or

Why Gold is Expensive in Indian Market.

Many Investors are amazed at this point in time, when Gold was continuously falling in International markets, but not in Indian markets, basically it has to follow the suit and react accordingly.  Investors are right, but pricing model of Gold is not as straight.  In this article we try to investigate reasons behind variation in Indian Gold price and its prices in International markets.

Before going further we should take one glance at some of facts & figures about Gold.

  • First and fore most reason is India is net importer of goods & services, including Gold & Silver.
  • Whether we believe it or not Indian is the world’s largest consumer of Gold, India accounts for nearly one-third of the total world demand for gold.
  • Indian is not largest consumer but also largest Importer of Gold, and Average rate of growth of import from 2008 – 2011 is 26.8% p.a.  Gold’s share in total import bill of the country has gone up from 8.1 per cent in 2001-02 to 9.6 per cent in 2010-11.  In terms of percentage share of gold and silver combined were the 2ndmost imported commodity in 2010-11.

From above facts it can understood that India is the biggest consumer and importer of the Gold, due to variety of reasons, which can altogether become different topic to discuss for.  Now, coming to the point, because of India is net importer of Gold, price of Gold varies with the exchange rates from which India is importing.  Moreover such transactions happens in Dollar, considering most liquid and globally accepted currency; so price of gold varies with movement in US Dollar with Indian Rupee (USD/INR).  So if Rupee appreciates in compare to Dollar, price of Gold tends to fall, and if Rupee weakens so the Dollar appreciates, price of Gold increases, irrespective of fluctuation in International price of Gold, and obviously with fluctuation in International prices of Gold, pricing in India will be accordingly adjusted.

Above points can be looked with two base case scenario, one in which only prices of base currency changes and not the actual price of Gold, and other scenario could be prices of Gold changes without any change in currency quotes.  In real world, both scenarios occur simultaneously and a price of Gold varies keeping every aspect in consideration.

Lets look at first scenario, where a price of Gold remains static in International market, and we only notice change in price of Gold due to change in currency valuations.  If Rupee depreciates in compare to Dollar (Base Currency), for example current USD/INR quote is 55 and if quote rises to 56 than it means Rupee is depreciating in compare to Dollar, than in that case prices of Gold will rise; whereas if Rupee appreciates than prices of Gold tends to fall.

In second scenario, where we only notice fluctuation in price of Gold, assuming there is no change in currency quote.  It is very much obvious that keeping all other things constant, with rise in International price of Gold, inevitably price Gold in Indian market will rise.

In practicality things are not as simple as we explained above, commodity prices are influenced by number of factors namely, price is function of demand & supply, fundamental reasons which can affect the commodity prices and last not the least any asset class including commodities are influenced  by the speculative forces.