Wider Downtrend Kicks Off as Momentum Indicators Fall

Russia-Ukraine Conflict

Commodity

Summary:

Overall, basic metals have experienced a turbulent year. Most metals performed strongly in Q1, given the increase in supply uncertainty caused by Russia's invasion of Ukraine. However, the metals market has been under heavy pressure for the rest of the year due to the stronger USD, rising interest rates, and weakened downstream demand.

SELL NICKEL

Close Time

CLOSED

28316.275

Entry Price

23133.000

35000.000

14896.230 -69.000 -0.46%

48545.0

Pips

Loss

23133.000

28801.725

Exit Price

28316.275

Entry Price

35000.000

Fundamentals

Overall, nickel has been a leader among the basic metals this year, managing to maintain its year-to-date gains in recent months. Nonetheless, LME nickel prices have pulled back sharply from year-to-date highs after a short squeeze as recession fears weakened market sentiment.

Volatility in the LME nickel market has become more widespread in recent months due to reduced liquidity since the short squeeze in March. Concerns about sanctions on the Norilsk Nickel coincided with a huge short bet by Tsingshan, the world's largest stainless-steel producer. This resulted in the price more than doubling in a few days. The London Metal Exchange (LME) was forced to suspend trading for a week and cancel nickel trades worth billions of dollars.

The LME subsequently imposed price limits for the first time and introduced a requirement to disclose OTC transactions to the exchange via derivatives. Since then, LME London Exchange volumes have declined as many traders have reduced activity or cut exposure as the market has lost confidence in LME and its nickel contracts following the LME's handling of the March short squeeze. Since March, the volume of LME's three-month nickel contracts has been 30% of the six-month level before the market turmoil after the short squeeze.

These low levels of liquidity expose nickel prices to the risk of sharp fluctuations - even in the case of small changes in the supply-demand balance.

We expect the short-term volatility to continue until the LME regains confidence in the benchmark nickel contract, trading volumes pick up again, and market confidence in it recovers.

NICKEL: Wider Downtrend Kicks Off as Momentum Indicators Fall_1

Technical Analysis

In the 4H timeframe, the momentum in the MACD is starting to fade, with the fast and slow lines coming to a death cross; the Relative Strength Index (RSI) remains below 70 and above 50 (in a downward divergence), suggesting there is more room to fall before technically turning oversold. However, the current price trend seems to be corrective.

On the upside, the bulls are facing resistance in line with the initial resistance of November 16. If this level continues to be the resistance, there will be more room for a further downtrend.

Although the LME nickel price still has the potential to move higher in the 4H timeframe in the short term, we believe that if the price stays below 29,000 for a long period of time, it is expected to remain bearish in the days to come, with a target range of 25,000-23,000 support area. It is recommended to go short at the highs.

Trading Recommendations

Trading direction: Short

Entry price: 28419

Target price: 23133

Stop loss: 35000

Deadline: 2022-12-20 23:55:00

Support: 27197, 25877

Resistance: 29114, 31255

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

News

Analysis

User

24/7

Economic Calendar

Education

Data