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Dec 08, 2012, 04.05 PM IST | Source: Moneycontrol.com

Commodities: Gold set to slide; bearish set-up for silver

Sharekhan has come out with its report on commodities trend. Gold formed a deep pull-back retracing more than 66% of the previous decline. However, it couldn’t extend beyond the key resistance zone of $1,790-1,800 where it had faced resistance twice in the recent past.

Sharekhan has come out with its report on commodities trend.

Gold- Set to slide:

  • Gold formed a deep pull-back retracing more than 66% of the previous decline. However, it couldn’t extend beyond the key resistance zone of $1,790-1,800 where it had faced resistance twice in the recent past.
  • From there gold has started falling. The fall is sub-dividing into lower-degree waves. Recently, gold retraced 61.8% of the first leg of the fall and started the next leg down. It has broken a rising trendline.
  • The daily momentum indicator has given a fresh bearish crossover whereas the weekly momentum indicator is already in bearish mode. The reversal can be trailed above the high, ie at $1,754.50. The low point of the fall ($1,673) will be the initial target whereas the equality target will be $1,635.
Silver- A bearish set-up:

  • On the way up silver had crossed a medium-term falling trendline (blue). However, it couldn’t extend beyond the 38.2% retracement of the previous decline. From there the white metal has started tumbling down. 
  • It has formed the first leg on the downside and retraced 78.6% of that. From there silver has started a fresh move down. It has broken a short-term rising channel on a closing basis.
  • The daily momentum indicator has given a fresh bearish crossover whereas the weekly momentum indicator is already in a bearish mode. The reversal would be above the high of $35.40. The targets on the downside will be the low of $30.67 and the equality target, ie 29.80.
Crude oil- Bearish potential:

  • Crude oil formed a sharp pull-back after a sharp decline. It crossed the 61.8% retracement mark and a falling trendline but couldn’t sustain in the higher territory.
  • Consequently, the oil has fallen significantly from there. It has broken the crucial weekly moving averages on the way down. The weekly momentum indicator is in bearish mode.
  • The commodity has achieved the initial target of $86, ie the 61.8% retracement of the previous rise. The subsequent target is $82.3, ie the 78.6% retracement mark. The reversal of the view can be kept above the moving averages ($92).
Copper- Triangle in formation:

  • As can be seen from the adjacent chart, in its previous move up copper had got stretched till $3.83, ie the junction of the 78.6% retracement of the previous fall (from $3.989 to $3.238) and the 20-monthly moving average.
  • From there the red metal had fallen below the 40-weekly exponential moving average (WEMA) and the 20-weekly moving average (WMA). However, bulls rushed in to provide support to the red metal. Overall, copper seems to be forming a triangle whose last leg on the upside is in formation.
  • Thus, selling on rise will be the strategy for copper. The reversal can be kept at $3.84. The targets on the downside are $3.45 and $3.30.
Natural gas- Under pressure:

  • NYMEX natural gas bounced from the lower end of the medium- term falling channel to the upper end of the channel. The rise itself was a channelised move.
  • Natural gas recently faced resistance near the upper end of both the channels as well as the weekly upper Bollinger Band. Consequently, it has started traveling southward.
  • The weekly momentum indicator is showing a negative divergence and is in favour of bears. Thus, natural gas is expected to fall towards $3.20-$3.00. The high of $3.94 will act as a key hurdle.
Jeera- Bearish stance:

  • NCDEX jeera retraced 61.8% of the first leg of the larger fall (from Rs16,915 to Rs13,250).
  • From there it has started the next leg down, which is sub-dividing into lower-degree waves.
  • After consolidating near the 20-WMA and 40-WEMA for several weeks, jeera started tumbling in the last week. The weekly momentum indicator is in line with the price fall. The targets on the downside are Rs13,250 (the previous low) and Rs12,200 (the equality target). The reversal has been placed above the swing high, ie Rs14,970.
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READ MORE ON  commodities trend, Sharekhan

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