Bull Market in Metal Stocks

Nov 19, 2021

Brijesh Bhatia, Research analyst

At the start of the year, I said metals would be the best sector of 2021.

These stocks have certainly lived up to my high expectations and delivered excellent gains.

But what about 2022?

Can these stocks continue their momentum? I believe so.

In this video, I'll show you, with the help of my charts, why the metals rally is not over.

Let me know what you think in the comments. I love to hear from you.

Hello viewers. Welcome to the Fast Profits Daily. Myself Brijesh Bhatia.

Well 2021 has been superb when it comes to the metal stocks. Nifty Metal Index has risen by more than 90%, if you look at the highs of around 6,300 from the close of 2020, and still, as we are approaching towards the year end, a month to go, it's still up by around 70-71%.

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If you remember, I have done a video at start of the 2021 that this year could be the year of metals, and it has been a superb rally for the matter space.

Well as we step into 2022 just probably around 5-6 weeks down the line, what should you expect from the metals? Will they rally continue? Or is it a full stop to the momentum? Well, first, let's look at the copper chart over here on the screen.

 

Copper prices have been on a bullish trend. Well, if you look at the last 8-9 weeks, it has been consolidating in a range, resisting at around 4.6-4.7 dollar mark onto the COMEX copper futures and again at the lower end, it has been managing to hold around the four dollar mark.

If you look at the two horizontal underlines on your screen over here, the upper line is the resistance, which was the previous highs over there, which was marked in 2011. The similar levels have been resisting as of now.

If you look since 2020 lows, the rally has been stellar, and I think this is just a consolidation or a breathing phase for the copper prices if look at the momentum over here.

The momentum can again resume once the consolidation and breakout would happen, which is around 4.6-4.7 dollar mark. And if you remember, have done an updated video few weeks back on similar lines, where I indicated that 4.6-4.7 dollar mark will be a huge break out for copper prices and which could again take a momentum for the metals space. So let's look at the copper prices against how the metal index has performed.

 

So if you look at the two, the blue line is the copper price and the orange is the CNX or Nifty Metal Index. Now, if you look at the similarity, both move hand in hand. We made a high of around 2011 in to the copper. Copper prices went down. Metal index went down.

If you look at 2016, where copper prices bottomed out, we saw metal index again bottoming out.

2018, where it rallied and again took a dip towards 2020. Similar phase happened into the metal index as well. Since the bottom into 2020 for the copper prices, metal index has seen a stellar movement in line with the copper prices.

So I believe once the resumption in copper prices happen, 2022 could be the year for metals or copper as well.

Even if you look at the other metals like aluminium, nickel, zinc, lead, they are still trading towards the highs, again, probably around 8-10% down from the highs. But still if you look at the larger trend, they are still into the bullish momentum.

Let's look at how the Nifty metal charts are indicating. So let's first look at the weekly chart over here.

 

So if you look at the weekly chart, it is going into the regression lines. If you look at this regression channel, basically, it is just an amazing technical tool, the regression channel, where it indicates that the trend would continue.

If you look at 2021, we broke out of that regression channel, and we are trading much, much higher above that, which indicates that the trend is very, very bullish. Even if you look at the line over here, which is the 34 exponential moving average on weekly scale, every time it has been acting as a huge support or resistance for the Nifty Metal Index prices.

If you look at the momentum, the price is still above the 34 exponential and I think 5,200 being the channel retest levels plus 34 exponential weekly moving average, this will act as a major support zone for the metal index.

Now we are trading somewhere around 5,500-5,600 levels, and any dip I believe, to 5,250 or to 5,300 could be an amazing opportunity as we step in to 2022. Again, I believe this could be the year for metal prices, the metal year, and prices could continue to outperform.

We've done a top down approach went into the daily chart and the daily chart was one which excited me to do this video. Look at the daily chart over here.

 

If you look at the blue lines first, this is the gann fan and again, this is has been plotted with the 45 degree line, and if you look at it, prices are taking support at the four by one line, which is again a very, very crucial when it comes to the gann fan.

Plus, if I look at the moving averages which is 100 daily exponential moving average, it is also taking a huge support.

Third, the time cycle. If you look down, I've drawn the time cycle, which is around 46 trading days. This is the 46 trading days, not the 46 days. Generally, the metal index prices trend in 46 trading day cycle.

Now, we made a 46 day lows somewhere around 5,500. We went on higher. We are testing on the same levels now.

Plus, if you look at the lower panel, the stochastics. Again, stochastics is a momentum indicator, but I've slightly modified it. As per me it's 14, 5, 5. Why? Because it generally gives me the short to medium term momentum.

Generally, people use 5, 3, 3 or 9, 5, 5, which is probably the short term. The 14, 5, 5, which I use is basically if I want to look for a trend of two to four months. So that's the reason I have taken it.

If you look at the stochastics, it has turned from the lower levels to the higher levels now, and it is trending on the positive side. So short-to-medium stochastics is giving a positive momentum. Time cycle reversal has happened. Prices are at multiple support levels.

Again, on the broader picture on the weekly scale of Nifty Metal Index is indicating that 5,200-5,300 would be an excellent opportunity on the metals space to go long.

I still believe you can start accumulating at current level as well, because looking at the daily chart, it is at a crucial juncture of the momentum. So start accumulating and in any dip to 5,200-5,300 could be an excellent opportunity onto the stock prices as well.

Now again, 2022 I believe, probably not the 90% move can be expected but yes, I still believe that it could be one of the amazing returns, the metal index could give in 2022 as well.

What is the risk over here which is the most important part?

 

If you look at the copper price chart again over here, the only risk, I believe is the 4 dollar mark or the 3.9 dollar mark line has being holding for quite long on to the metals space. If I just look at the 2011 history, prices corrected, made the neckline and went on to the downside. That could be the only risk as of now, I think looking at the copper prices.

Generally, as I said, the metal index is followed by copper prices and in case copper prices correct, metal index could be the one which could see a downtick. So that's the major risk one should keep a watch on.

So 3.65-3.8 dollar mark on the COMEX copper prices will be very, very crucial to watch out and in case those are broken on a weekly scale, I believe then that could be a trend change level as per the historical move.

But till then, I believe the metals prices still have a huge room and probably I'm eying the new all-time high, which was around 6,320 could be surpassed. 6,300-6,320 was the level and that could be surpassed probably in a few months' time. I believe 6,500 to 7,200 is a level which I'm eyeing on the metal index in the 2022.

So stay long and I believe 2022 will follow the momentum of 2021 in the metals space.

Signing off. Brijesh Bhatia.

Warm regards,

Brijesh Bhatia
Brijesh Bhatia
Research Analyst, Fast Profit Report
Equitymaster Agora Research Private Limited (Research Analyst)

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