NICKEL TODAY: Another short-lived rebound?

Very short term (1M):  Flat 
 Short term (3M): Flat
Medium term (6M): Up
Long term (12M): Up
R1 12,773 20 DMA
R2 13,000 Psychological price level
R3 13,300 50 DMA
S1 12,190 Jan 2018 low
S2 12,085 Sep 12 low
S3 12,000 psychological level
Trying to turn

BB - Bollinger band
Fibo - Fibonacci retracement level
HSL - horizontal support line
SL - support line
MACD - moving average convergence divergence
DTL - downtrend line
UTL - uptrend line
H&S - head-and-shoulder pattern
RSI - relative strength index

  • The London Metal Exchange three-month nickel price found a higher low on Tuesday September 18 at $12,130 per tonne and produced a bullish engulfing daily candlestick.
  • The daily RSI has positively diverged too while the stochastic lines are gearing to edge higher.
  • Therefore, a potentially bullish double-bottom formation could be in play for a short-term relief rally to take place.
  • But the upside could remain limited, with the 20 DMA still in decline and its price action still trading within a downtrend since the June 6 high at $15,845 per tonne.      
Macro drivers
China’s premier Li Keqiang's speech at the World Economic Forum event in Tianjin has brought stability to the emerging market (EM), shoring up confidence and bringing back risk-on sentiment concurrent with the premier extendinghis view that China has ample policy tools to cope with difficulties and challenges. Kegiang added that China will not devalue the yuan to stimulate exports and the government will maintain steady growth. 

Nickel can still rely on its bullish fundamental attributes, with the decline in global inventory levels, an optimistic demand outlook from the electric vehicle sector and the structural market deficit to boot. Even though China retaliated with new tariffs at 5% and 10% on $60 billion worth of US goods, the base metals complex has largely shrugged this off and the LME nickel price saw follow-through buying this morning, up 1.62% at the time of writing. With the trade dispute between the United States and China slightly toned down, nickel bulls may consider rebuilding at this discounted price level while shorts could consider covering some of their bearish bets. 

A softer dollar index has provided tailwinds and nickel’s bullish micro dynamics should support higher prices for now. Total LME nickel stocks remain near the 2018 low at 232,068 tonnes after an inflow of 540 tonnes this morning was cancelled out by an identical amount of outflow. Meanwhile, nickel stocks in the SHFE have mildly recovered to 16,863 tonnes, though there is very little to suggest that a trend reversal is in store. 

Physical business has picked up prior to a national day of holiday in China, with seaborne cargoes' delivery expected by the end of September. Yet nickel premiums in Asia stayed flat amid thin trading conditions. In Rotterdam, full plates' in-warehouse premium rose to $210-250 per tonne from $200-240 per tonne the previous week, while market liquidity increases with multiple deals pushing premiums higher. US Midwest premiums were unchanged. supported by limited availability. For our detailed global nickel wrap, please click here.

Since the June sell-off, buying conviction on all base metals remains fickle, despite evidence of growing physical tightness. The negative macro-economic backdrop continues to dominate the positive fundamental development for now. As such, we envisage the LME nickel price will continue consolidating near recent lows and the rebound momentum will be capped.

All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.


September 19, 2018

12:00 GMT