A Room with a Technical View 23/05/22

Capesize

June futures – Technically bullish last week but in a corrective phase; having traded to a low of USD 34,625 the futures have traded above the USD 39,250 high, to USD 43,500. Elliott wave analysis would suggest we are on a wave 5 of the cycle that started on the 29/04/22 with a potential upside target between USD 46,302 and USD 46,521: note, the move above USD 39,250 means the minimum requirement for phase/cycle completion has been achieved. Downside moves that hold at or above USD 37,642 will support a bull argument, below USD 34,625 the technical is bearish. The intraday RSI is in divergence with price, warning of the potential for a momentum slowdown. Technically bullish with an upside target just above the USD 46,000 level, the divergence is warning that we have the potential to see this phase of the cycle complete soon.

 

Panamax

June Futures – the corrective move lower held above the USD 26,620 support resulting in the futures trading to a new high (USD 30,375); however, the new high created an intraday negative divergence resulting in the futures entering a corrective phase. Technically bullish based on price, the downside move has held the USD 28,230 support before holding the USD 29,754 resistance, meaning the futures have a neutral bias on the intraday technical. Key fractal support on the daily technical is at USD 27,125, below this level we target the USD 24,750 level. 2022 has produced two bullish waves between Jan-March, these waves both consisted of 3 waves, warning the upside move is potentially part of a larger corrective move. If we trade above the USD 33,625 level it will signal the longer-term Elliott wave cycle is bullish, as price will have confirmed a 5^th wave within this cycle; however, until it does, we remain cautious, as warning signals point to the downside.

 

Supramax

June futures – we noted on the morning technical on the 18/05 that we have concerns regarding the Elliott wave cycle being corrective, and not bullish impulse. We will reiterate this again in case it was missed. Elliott wave in its basic form consists of 5 waves, 3 up and 2 down. There are 5 golden rules, the rule we will be focusing on is the wave 3 can never be the shortest wave. This year we have had to clear bullish impulse waves, with the second wave (which would be the wave 3) being shorter than the first, meaning that any bull wave from here must be shorter than the move between Feb-Mar 2022. Why is this significant? Working on the assumption that this year’s move is linked to last years, the rolling front month futures cannot mathematically trade above last years 42,250 high. This would suggest the upside move in 2022 is in fact part of a larger period corrective phase, the only way we can make new highs is if we are looking at some form of wave-3 extension. However, we cannot come to this conclusion based on the information to hand, suggesting the futures are vulnerable to another move to the downside. Only above USD 38,000 can we say that this move is bullish impulse. Downside moves below USD 30,750 will create a lower low, meaning the technical is bearish.

 

Oil

July Futures – The futures held support last week resulting in price trading above the USD 114.84 resistance, taking the technical into bullish territory. Having made a new high (USD 115.69), the futures traded back into the EMA support band (low USD 105.70) before trading up to USD 114.34 today (23/05/22). Technically bullish based on price, the longer-period EMA’s remain flat and compressed, implying a lack of trend in the market. Upside moves that trade above and hold above the USD 115.69 fractal resistance will target the USD 123.74 level. Likewise, downside moves that trade below USD 105.70 will warn the USD 101.30 fractal support could be tested. Price action is bullish, the trend is neutral, suggesting we need to see more from the futures to convince the market we are going to see a more sustained run.

 

Iron ore

June Futures – We noted last week that the technical was bearish with upside moves considered as countertrend. Having confirmed the intraday futures were on an extended wave three we traded to a high of USD 131.40 before trading to a new low of USD 119.80, signaling we had entered the 5^th and final wave. The upside move on the rate cut last week confirmed the downside move had completed, meaning we now have a bullish bias on the technical. Price has traded to a high of USD 139.15 before correcting on an intraday divergence today; downside moves that hold at or above USD 126.38 will support a bull argument, only below USD 119.80 is the technical considered to be bearish. Bullish, but in a corrective phase with price trading on its opening values, warning support levels could be tested in the near-term if we close around these levels, if we trade above USD 139.15 then we target the USD 146.95 fractal on the daily technical.

 

Steel

June Futures – The futures continue to consolidate having moved sideways for the last 9 sessions. Price has traded to a low of USD 1,160, indicating that although we remain technically bullish, we do have a neutral bias due to the deep pullback. Upside moves that fail at or below USD 1,451 will leave the futures vulnerable to further tests to the downside, above this level we will target the USD 1,602 high. If we trade above the USD 1,310 level it will warn that resistance levels could be tested; likewise, a close below that holds below the USD 1,160 will warn that we are breaking the consolidation phase to the downside, suggesting the USD 1,086 and USD 9,47 support levels could be tested. Technically neutral.

 

Tanker TD3

June Futures – We noted last week that the downside move below USD 9.0323 alongside weakening momentum had warned that the USD 8.2730 resistance is now vulnerable. The futures continued to lower with the futures trading down to USD 8.5690, before finding light support, putting price back on the 8-period EMA at USD 8.7750. The futures have now formed a fractal resistance at USD 9.2610, upside moves above this level will create a higher high, meaning the futures will be bullish above this level. Downside moves below USD 8.2730 will mean the technical is bearish, warning the USD 7.5730 and USD 7.3750 support levels could be tested. Technically neutral, the RSI and its moving average remain below 50 warning the USD 8.2730 support remains vulnerable at this point.

 

Coking Coal

June Futures – two weeks ago we highlighted a small 5 wave pattern that warned the futures had the potential to exhaust, this was supported by a negative divergence that warned we had the potential to see a momentum slowdown. Price has since consolidated between USD 490 – USD 481.64 since, indicating the technical is currently neutral. Upside moves that close above and hold above the USD 490 level will target the USD 535 high; however, this could potentially create a second negative divergence and will need to be monitored. Likewise, downside moves that close below USD 481.67 will target the USD 435 level. Technically neutral, we maintain our view that the futures remain vulnerable to a test to the downside.