Crude as an asset class worldwide has been seen as a prime suspect for the last years sell off in Equity markets but now its time to rethink on our view. There has been crucial cold war in Crude production between US, OPEC and Russia since start of 2015 which has resulted in glut in crude market but recent news are sign of something positive coming in the future. Iran has been in focus as they are trying to regain market share in crude production since the sanction lift in last year. But i don’t think there are much worries on production side ahead as OPEC countries including Iran has reached 90% production of the capacity in April as per Bloomberg data source. Total capacity of OPEC is 36657000 barrels/day and they produced 33217000 barrels/day in April. So now there are no chance of any further rise of production. So to sum this up, if they aint any freeze in output in meeting on June 2 then there is not even room to produce more which means output should remain at this level atleast. And most importantly, Russia might join June meeting and there could be a common decision to freeze output which was long awaited support
Even monthly chart of WTI Crude is showing some sign to support Crude output freeze in June. As its always said charts are first to show signs of reversals, this time also it could be true. Monthly charts of WTI as attached are showing that commodity has approached resistance line of the channel and there are full chances to break this downtrend which has been intact since December 2014. To support resistance channel breakout we have other factors too. Blue arrow marked shows positive divergence of Crude price in recent months with RSI giving a strong feel of crude getting back to post $50 mark. But before reaching out crucial levels on upside, we have a strong resistance level at $47. That level has been pivot before a thrust sell-off last year below the same. Secondly, it is exactly the level which will be considered as breakout level of the channel. Thirdly, Volume since recent lows have increased which is confirming that crude prices are bottoming out. And finally its also the SAR resistance mark. So overall my view on Crude is positive from the level above $47 and target on the upside would be next resistance level of $62 which is 200 Monthly average.
Recommendation: Buy WTI Crude above $47 with tgt $62 and stop loss: $41.80
Crude has been the most outperforming asset class this 2016 in terms of Rally but now somewhere it is nearing a small profit booking mode. As i initiated long call a way back at $32 with targets of $40 but now i would take a sell on the crude. Even Iran has intimated that they wont cut production atleast for some time in near future so supply could constantly rise. As you all could notice on the daily chart, we have seen a “Inverted Hammer” on Friday and also closed 50% on the green body of previous candle making charts more weak. On the other side, we are witnessing negative divergence of Price to RSI so we can surely initiate a short call on the crude with the targets for 100 day average (green line) on the support side.
Strategy: Sell with Sl $41.20, tgts 36.50/35.30
Natural Gas have seen a complete sell-off in recent times but now it seems that we are witnessing it bottoming out with a positive divergence on weekly charts as marked. If today’s close is above 120.80 (as i expect) than “Bullish Engulfing” pattern would be formed and reversal could be marked. A commodity trader must go long on the same with strict Stop loss as suggested.
My final target $38 has been triggered for long recommendation on WTI Crude which was given on post “Crude could rally a bit from here” on 18th Feb! We saw tremendous rally on the crude last night around the globe which was one of the biggest intra-day rally of 2016. Technically now crude has surely bottomed out for the longer term horizon and we could see continuation of strong short covering in the commodity in near future. But as on weekly chart we could notice that commodity is trading at resistance line around $38 while next resistance is at $40. So for a safe trade we should avoid taking a call on either side for trading in this range and rather wait for a confirmation. So my advise is to wait and watch until we get some strong move out of this range.
Finally we have seen some spark in WTI Crude and it has crossed my first possible target $33 which i posted on “Crude could rally a bit from here” on 18th Feb. Interestingly, breakout has given another bullish pattern “Double Bottom” and it the target comes down to $40 which is just above my second target of $38 which is 100 day average. Globally equity markets have picked up on expectation of economy recovery and expecting pull back in demand of Oil around the world. So now we can expect Crude to consolidate and resist near to 100 day avg around $38.
Gold had given a good run up since last one year, when interest in the Equities had faded off. But now things could change and money could flow back into Equities after government wining trust back through a budget which was surely repairing our Fiscal targets. Two more fundamental reasons for Domestic Gold to witness sell-off are, appreciating rupee and sell-off in International gold. Equity markets around the world have seen a quick rally from almost 200 Weekly SMA and so alternative investment asset gold has to see a profit booking.
Technically as chart suggest, a wedge pattern breakout has been confirmed today at 29200 which is trigger level for Shorting gold. Indicators on the daily chart are also in overbought zone supporting the wedge breakout. Though Confirmation depends on todays closing but i would take a risk early considering cross market analysis.
Recommended Strategy: Sell Gold (CMP:29130) Tgt: 28000 SL: 29800
Gold had been the most under performing invest asset since last 4 years since it pinched to new high but in recent past it has outperformed all the equity markets with some quick short term gains. Today i finally managed to get some time to analyse asset from the longer term perspective and just caught hold of a channel on Monthly chart of USD Gold and we could notice that its perfectly trading in that channel since late 2013. Though the channel is downward sloping which means overall outlook is bearish and this is just a short covering, but look at the indicators. Indicators are highly oversold that too on monthly chart, and are their moving averages are emerging over the indicator. This gives me a bit bitter moment being a equity guy. It is usually believed that Equity and Gold are inversely related because in rest of the world, except india, its just considered as an alternative investment idea! So if the gold demand is increasing, it simple states that equity money is following to Gold worldwide. But still a long term reversal confirmation is AWAITED. As you all could notice in the chart, gold is approaching resistance on the channel which is at $1258 (100 Months moving average) while another strong resistance is just above it which is at $1300 (Fibonacci resistance and channel resistance). So for confirmed breakout on Gold and a confirmed sell-off in equity, range of $1258-1300 is crucial breakout. Only time has the say now…so lets wait and watch.
Crude Oil has seen a great fall from its high last year and global crisis could be attached to this fall. A fight between oil producing countries had led to excess supply and over it now we will have Iran flowing its crude in the world by mid this year. Surely this is the best time for India as we import almost 75% of our oil requirements. But after the OPEC meeting this week, where they decided to hold oil supply, we could witness a relief rally on the WTI crude of almost 10-15% from here. But surely this would be considered only the relief rally and then we can expect crude to consolidate. As you all could notice in the chart, we have got a positive divergence with RSI which gives us a trade to buy. Secondly, crude was trading in the downside channel, but it gave a false breakout as it couldnt confirm three close below the same and we traded back on the channel which is positive. Thirdly, we have got a double bottom on the charts with that false breakouts. So overall, we could trade for a long targets for near time. Targets: $33 which is channel resistance as well as 50 day average above which we can get $38 which is 100 day average. Stop loss: $26