Lead(ing) from the Front

JC Parets
April 29, 2021

One of the most anticipated moves that market participants have been waiting for, is a rally in the Commodities space. We had seen some signs of this in December '20-January '21, but those moves didn't sustain. On the contrary, the base metals moved below their resistances and consolidated for two months.

Aluminum was the lone star in this group that continued to power through, despite the overall weakness that was prevalent in this sector.

This was a major reason why we continued to hold out for a rally in the base metals- Relative Strength. Aluminum was displaying relative strength against the rest of the metals. Had it been a scenario of overall weakness, Aluminum would be moving south as well.

We've noticed a pick-up in activity in the same names that were correcting/consolidating and thought this is as good a time as ever, for an update!

Anyone looking at this chart could tell that Aluminum has been on a tear. The price broke out of a three-year base and achieved our target of 189. Following this, the rally has been uninterrupted as it attempts to move towards its next target of 227. When the price breaks out of big bases, it is generally followed by a strong move. That is exactly what we're seeing here.

The indicator too isn't shying away from displaying strength and this adds to our conviction in the current move.

We are bullish above the level of 189 with a target near 227.

Click on chart to enlarge view.

While Aluminum has been basking in its own glory, we've been tracking the other metals to see if they catch a bid too. Guess what? Looks like they just did!

Lead seems to be leading the way when it comes to the rest of the base metals, as the price moved past its resistance at 170. Taking another go at the overhead resistance, we're keenly watching to see if the seventh time's a charm!

We are bullish only above the level of 170, with a target near 210. A sustained move above 170 is imperative to confirm this breakout.

Copper is fighting to make a comeback as the poster boy of the base metals as it claims new all-time highs. The price is moving past the resistance of 750 and the indicator too is alluding to the strength in the metal. Take a look at the indicator. The line hasn't moved below the 50-mark, adding to the narrative of the price gaining more muscle.

A move above 750 would be bullish, with a target near 1,040.

Zinc is next in line. The price is attempting to break out above the long-term overhead supply zone of 231 as the base metals attempt to resolve higher. This is the fifth attempt at such a breakout, and what remains to be seen is if we witness a follow-through rally post the big-base breakout.

Zinc is positive only if it sustains above the risk management level of 231. The next target to track would then be 285.

Nickel is the last one to join the party. As can be seen from the chart below, the price has several levels to cross before we could confirm a breakout. This is a massive base to break out of, and seeing as Nickel hasn't taken the lead in the past, it will be a group effort (a base metals rally) for this metal to move past its monster resistance!

1,320 is the level to watch out for. A sustained move above this level could give us a further indication as to whether 1,650 is on the horizon or not. Until then, we're happy to observe!

Commodities and BaseMetals in particular have been hinting at some sort of a big move in the coming future.

When all other metals were down, Aluminum refused to move lower.

When Gold was displaying no resistance, Silver refused to give up its relative strength against the yellow metal.

These are signals where despite there being a pause in the ongoing trend, we cannot write off the entire category as weak or go ahead and initiate short ideas in the same. There is something telling us that now is not the time to short. In such times, we prefer to wait it out and let the market guide us, regardless of how long it takes.

Tell us what you think about the relative strength in the small pockets of these sectors.  We'd be happy to hear from you.

Allstarcharts Team

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