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Commodity: Situation tense but under control

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The rise and rise of commodities in recent past has started to affect the Governments and the economy observers alike and talks of inflationary pressures have started doing the rounds. Even the ECB chief hinted that they won’t be hesitant if a rate hike was required. A glance at the CRB Index weekly charts suggests that the rally in commodities has still some steam left before any meaningful correction and/or a trend reversal would set in.

The current levels are near to the peak of year 2008 and hesitation at around the previous peak isn’t new for any underlying. But selling short purely on the fact that its near to its previous peak can be disastrous and anyone who is thinking of taking a bearish position should allow the CRB Index to break down at least to 564 levels before considering short trade.

However if someone is holding longs then the trailing stop should be placed around 603 areas which is the immediate area of support for the CRB Index. A glance at the individual charts of commodities is painting a different picture. On one hand daily charts of Silver is suggesting caution for long position holders followed by a similar chart pattern in Gold which is
indicating some profit booking in the coming week. On the other hand, chart of HG Copper is indicating that the upward bias could stretch for some more time and taking a bearish view in HG Copper should be avoided. Heating Oil and Crude oil charts are suggesting an upward bias and one can look forward for some gains trading with a bullish position.

Overall the outlook for commodities for the coming week is mixed, energy commodities would continue to swing upwards and metals like copper are still not showing any weakness. The only area of weakness is in precious metals wherein Gold and Silver could see some more profit booking in the coming week.

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Written by Dwaipayan Poddar

January 17, 2011 at 10:45 am

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