Is Nickel the Aluminum Of 2019? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Is Nickel the Aluminum Of 2019?

Jul 22, 2019

Vijay Bhambwani

Financial markets are an excellent study in Behavioural Science. The influence of human emotions in asset pricing is amply evident in the markets.

Circa April 2018 - the price of Aluminum, the third most ample element after silicon and iron ore, shot up by over 50% in a fortnight.

This was after the temperamental US President Donald Trump tweeted about imposing trade sanctions on Rusal (Russian Aluminum Limited). The price rose from Rs 128 on 5 April 2018 only to peak out at Rs 178 on 19 April 2018.

The markets had reacted in a knee-jerk manner. The prices on the commodity exchanges kept hitting one upper circuit after another. At least two companies' CMDs went on primetime television and said Aluminum prices would double.

--- Advertisement ---
Here's an urgent profit opportunity from us that no mainstream media is revealing...

The #1 Stock for 2021.

...An innovative stock with the industry giants chasing it for its technology to touch millions and millions of people every day.

It serves several clients across the globe, but what got me is this...

The stock is leaving all its competitors behind despite the COVID crash, and now the price has already started to move.

There's actually one more reason why this stock could take off and make its early investors rich.

It's revealed here in this note with transparency.
------------------------------

The hypothesis was based on simple mathematics - reduced supply would jack up prices. Under ordinary circumstances, the logic was sound. However, there were gaping holes in that argument.

Aluminum as I mentioned before, is in ample supply worldwide. Secondly Rusal contributed only 9% of the global Aluminum output at its peak production. Moreover, the ban would only be respected by the US and allied nations.

The eastern European nations and the Chinese refused to severe trade ties with Rusal. The ban was not only a half-baked measure, but also doomed from the very start.

What would a thoughtful trader do?

Keep your ears to the ground and hear the hooves of approaching horses. I did the next best thing possible. I called up my friendly Aluminum item sellers - people who sold sliding window channels, furniture fittings, and allied items. What they said confirmed my suspicions. Nobody was buying the price rise story. Demand was drying up at higher prices.

Small Presentation: For Those Looking to Buy Stocks

This was the market giving its thumbs down to Donald Trump's "embargo" on Rusal.

Then the inevitable happened. On 19 April 2018, after hitting another one of those upper circuits, at Rs 178, Aluminum started its free fall.

Lower circuits followed. The confused bulls did not know what hit them. By the 24 April, the price had crashed to Rs 145. There was a flurry of margin calls as brokers unwound positions of clients whose accounts were short of funds. The decline stopped only at Rs 125 levels.

This is a full Rs 3 lower than where the rally had started! Thousands of uninformed traders had lost their shirts.

The lessons taught by the market are always bitter and expensive. One would have thought last year's lesson was tough enough to remember for a lifetime. But a study of behavioral science tells us that we tend to commit the same mistakes, over and over, like a juke box playing music in an endless loop.

Take the case of Nickel in July 2019. The price has rallied up from Rs 828 levels on 20 May 2019, to Rs 1,043 on 19 July 2019.

--- Advertisement ---
How to Unlock Almost 3x More Gains During the Corona Crisis...

Good News...

Our top analyst Richa Agarwal just identified 5 "pandemic-proof" smallcaps that could win the war against coronavirus...

And deliver up to 50-100% gains really fast!

She has revealed the exact details of these 5 high-potential smallcaps in her latest special report...

Check It Out Now...
------------------------------

The reason?

Indonesia (a swing producer of Nickel) has announced it is contemplating a ban on exports of Nickel from the year 2022. Yes! You read right. Year 2022 - full three years from now.

The fuzzy logic of the market participants is doing a repeat of what Aluminum did in 2018. Apparently public memory is short and the learning curve is flat. Nickel is probably turning out to be the Aluminum of 2019. The market reacted in a knee jerk manner. The prices on the commodity exchanges leaped higher.

Am I buying the bull market hypothesis of Nickel?

Not yet. Sure enough, the volatility in the US dollar is strengthening hard assets. There is an inverse correlation between the US dollar and commodity prices. This is pushing up prices of the entire industrial metals basket.

So Nickel is not alone. Copper, Lead, and Zinc have risen too. But the rally in Nickel has exceeded the gains made by other metals by a wide margin.

That is what makes the sustainability of the up thrust questionable in Nickel. Expect a mean reversion soon.

However, the volatility studies show the ride will be far from smooth for any side.

Have a profitable day.

Warm regards,


Vijay L Bhambwani
Editor and Research Analyst, Weekly Cash Alerts

Vijay Bhambwani

Vijay L Bhambwani, is the editor of Weekly Cash Alerts and Fast Income Alerts. He is a professional trader, author, trading mentor, and lifelong student of the markets. He has been an active trader since 1986. Financial markets are his life and passion. Everything else in his life revolves around his main objective - trading. Vijay believes that no matter how much a trader has lost in the market, it is possible with hard work and smart work to get it all back over time. Understanding the method behind the madness of the markets interests him more than the profits. He specialises in predictive style of technical analysis, in the commodity, currency, and equity markets. That is the foundation stone of his style of trading - Neuro Behavioural Technical Analysis. Vijay trains other professional traders. He is empaneled with the BSE & NSE as a visiting faculty for various finance market courses. He created the early course content for the Diploma in Commodity Markets (DICM), certified by the Forward Markets Commission. He was a training mentor at the MCX between 2005-2009. He is the first author to have his book - A Traders Guide to Indian Commodity Markets published by CNBC Publishing 18, in 2009 - approved and sponsored by the NCDEX. Vijay has done over 8,000 TV shows in the last 17 years and has written over 4,000 columns/articles in the print and electronic media. He is one of the first columnists to write a weekly column in the English language print media after the commissioning of the MCX, via his columns in the DNA Money, Business Standard and others. Vijay lives with his family in the posh Breach Candy area in Mumbai.


Equitymaster requests your view! Post a comment on "Is Nickel the Aluminum Of 2019?". Click here!

  

More Views on News

BSE Sensex Surges 510 Points; ONGC Among Top Gainers (Market Updates)

Sep 28, 2020 | Updated on Sep 28, 2020

The BSE Sensex Surged 510 Points; ONGC Among Top Gainers. Find the latest update, special reports and news on all time high gainers of BSE Sensex at equitymaster.com.

Why the Market May Rally for a Few Days (Fast Profits Daily)

Sep 28, 2020

Why I think the market can rise for the next few days.

My Top Pick for 2021 is Not a Stock. It is Something Much More Powerful (Profit Hunter)

Sep 28, 2020

My top pick for 2021 is something that has helped me and my subscribers beat the stock market by a factor of 2:1.

Your Queries on the 8-Year Cycle Answered (Fast Profits Daily)

Sep 25, 2020

You've sent in your queries on my videos on the 8-year greed and fear cycle in the market. I'll answer them in this video.

It's When You Sell that Counts (Profit Hunter)

Sep 25, 2020

How I alerted readers to the impending crash last week.

More Views on News

Most Popular

Commodities Trading: From Pits to Screen

Trading in commodities is perhaps as old as the human civilization. Find out how it will unfold in the future

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Sep 28, 2020 (Close)

MARKET STATS