A view on commodities

Hi Ankur,

From the chart you will note the trend in Silver is down. So a big spike upwards will give way and is used to trigger SL for shorts. If you have the patience, (takes a long time since commodity trading is approx. 12 Hours plus) you will get a good opportunity to short any spikes.

I have observed, that after making a low for the day, (where intraday players will be all short), there will be a huge spike in prices, which will be over the high of the day. All intraday shorts will be wiped off. Those taking a long position based on the price move upwards, will also be stopped, as the price will retreat from the highs to near the lows and close somewhere in the middle. So the longs lose, shorts lose, and the smart players with big pockets make money. This happens over and over again.

Trading silver, crude etc. (both of which are in an downtrend) requires a trader to just watch the charts doing nothing - as indicators will give many buy and sell signals. It is important to wait for a range to form and to get a good gauge of the market trend, and then enter - Only when a good opportunity is given to enter in direction of the LT trend.

At the moment, crude and silver are heavily oversold, and a bounce can be expected. Crude more so, as the sell off has been huge, fundamentally due to low demand and excess inventory (from Iraq, Kurdistan, Libya making its way in the international market) However, due to fresh skirmishes in the Ukraine border (after a ceasefire was agreed with Russia) crude along with precious metals can give a smart bounce - which will be an opportunity to short, basis intraday chart on a smaller TF.

Silver EOD attached with notes. Trust this clarifies. (Stating the obvious : Everything can be perfectly explained in the chart. However, trading in realtime is a different reality. But it pays to trade with the long term trend)

PS : Long term trend : Basis visual pivots. Lower Lows (LL) and Lower Highs (LH) is downtrend and Higher Highs (HH) and Higher Lows (HL) is Uptrend. This along with Supertrend signal on EOD basis 10,3 is the LT or rather direction to take a Swing Trade. This is dual confirmation and a firm trend.

Counter trend opportunities will be available and last for a few days at most. Check this basis 5 Days, 15M chart, which can provide additional confirmation. Ensure price break above range of HH, but avoid signal if the same is on gaps. Such as Silver which has gapped up today and is buy as per Supertrend 10,3 For me this is an avoid for now. Will look to short on a spike above the high of the day with a small SL.

Curious to know , if I may ask, Few questions regarding how one may decide to enter a trade in any of the commodities.
Please take note -Kindly reply at your free time and please not while you are trading.

1] Would it be useful to give thought to Open Interest to enter a trade? If yes , where can one check this please? At Mcxind dot com I often check the bhav copy to note down the OI values’ eod . I wondered if that is good enough. Wouldn’t it be better if one could access this live while trading, if yes ,is it possible in any site please?
2] Can one enter a position [ a day trade] wholly based on tech alone? And not consider the data or news etc? Because, the news may have been factored in ?
Assuming thus would it be wrong?For have noticed the reaction , especially on inventory days of Crude and NG
3] Would it be good to enter long in NG. it is trading near the life time low area 228.3 for sep’ series?
Kindly take your time , even a weekend will do
Thank you. Enjoy your trading Best of luck

pls note mcx rates based on international + curreñcy exchange. so there is no meaning in following anything līke open interest in mcx.
pls follow nymex.

Catch22, My views :

* Some trader trade derivatives using Open interest positions. Don't know anybody doing so in commodities. Indian commodity markets are driven by : Prices of International prices of commodities traded on LME / CBOT / CME / Shanghai exchange. The second driver is the USDINR pair (thanks to TamilTrader from who I learnt this first), since commodity prices are quoted in USD, a rise or fall in USD vs INR will be reflected in the prices of the same on MCX. The same point has been addressed by MT4Trader.

* If you trade commodities, you will note that there are certain events/data that impact the prices of commodities. E.g NFP data, or it may be Fed reserve outlook/speech. Billions of dollars change hand based upon the market interpretation of Fed. announcements and market data. I don't think that these are factored in, as have observe volatility/spikes on release of this news and data, especially if trading gold and silver. I prefer to avoid trading this volatility, as big price moves can be expected in either direction and have a 5 figure impact on your position. In my view crude and NG data has a limited impact for the day, unless they are highly overbought/oversold and the news can be used as an excuse to trap existing traders. Once even -ve news on NG storage, led to a 5 digit spike as NG was heavily oversold. Some NG traders had a query on the forum, why the -ve data in NG led to huge upsurge in price.

If trading commodities, check this link daily :

http://www.investing.com/economic-calendar

* NG has bounced off a triple low with a 2.44% gain yesterday. In my view, it is an opportunity to short at a higher level. You have to ask yourself as to why the price of NG is low. It is usually due to demand/supply which is not an issue. Other is the weather patterns. Winter season is a bit away, and NG in my view will go to further lows, before rallying off smartly in view of the approaching winter season.

My 2c.

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Hi
i am new to this forum.i want to know basic technical infr about commodity.i am intraday trader past 2 yrs.i followed only my brokers call so i thought of doing trading on my own research.so plz help me how to start with.

Hi Thamaraier,

Commodities are high risk-high reward business. One can trade basis fundamentals as well as technicals. Take your time on the forum and go thru many different threads on the subject. Learn also about risk/money management and trading disciplines. Only when you are confident do go ahead. Suggest start with mini-lots only. Good luck.

The negative inventory report last week led to a sell-off on NG. And though NG looks weak, it may be due for a turn around, based on the record snow storms which have arrived early in the US. As NG traders are aware, NG fundamentals are driven by weather patterns and inventory. With NG trading at support levels, one of the two factors are set in place. Have to watch NG open on Monday for a swing trade.

Summer Snow Storm Sets Records In Parts Of United States

Edited excerpt :

http://www.huffingtonpost.com/2014/09/12/summer-snow-storm-record-early_n_5812218.html

Winter came a little too soon for some Americans this week, as an early-season snow storm moved through parts of the western United States. And it’s more than just a dusting. The three day average shows several areas of South Dakota, Montana and Wyoming received more than seven inches of snow, according to the Weather Channel. Up to 18 inches was estimated to have fallen in the Bighorn Mountains in northern Wyoming.

North Platte, Nebraska; Rapid City, South Dakota and Cody, Wyoming all reported the earliest snowfall on record this week. Boulder, Colorado also saw its first snow of the season, with less than an inch reported on Friday morning. Photos of what some are calling “Snowtember” appeared on social media and local news outlets. While some celebrated the first snow of the season, others lamented that the rest of the country was still enjoying summer while they froze.

This is really very useful.Thanks a lot !

Likely, NG should gap up. The real move should be before the US open. So in between, any dip, should be an opportunity to go long. My view.