Nickel bears on borrowed time

This report, originally shared with Fastmarkets subscribers on 30 January to help them stay ahead and informed of market movements, was published before the move or rebound happened.

Pullback is another buying opportunity

In our previous technical report we said that if the LME nickel price runs into selling pressure again, it will only be temporary and it will offer late buyers another opportunity to go long. We added that the healthy pullback that we envisaged would be a rejection from the 100 DMA and a retest of support near the 20 DMA and/or a back test of the $15,500 per tonne level – forming what looks like the right-hand shoulder of an inverse head-and-shoulder pattern.

The potentially bullish inverse head-and-shoulder pattern has a neckline at $16,000 per tonne and only a fi rm break of the neckline will trigger more technical buyers to enter the nickel space. And, assuming the bullish pattern plays out, we envisage the LME nickel price will mount a move to the upside to target $17,000per tonne.

Our short-term bullish bias will be invalidated if the LME nickel price produces a bearish monthly close below $14,500 per tonne.

Positive seasonality still in play

Our short-term view on LME nickel remains unchanged as of Thursday January 30. Seasonally positive momentum in the fi rst quarter of 2025 will minimize any downside moves and we urge readers to remain cautiously bearish, which means we are not looking to be aggressively bearish on nickel and suspect that any sharp dips will be brief and should attract dip-buying interest.

Fresh selling among funds but are they on borrowed time?

It is unsurprising to see funds selling into nickel again as it approaches $16,000 per tonne. And we now wonder if the recent price weakness will attract dip-buyers again.

LME nickel monthly chart has bullish medium-term bias

Despite the overwhelmingly bearish sentiment toward LME nickel, we are only cautiously bearish and envisage that the oversold technical configuration will soon give way to a short-covering rally in the coming weeks.

But any rebound is likely to be limited and fresh selling could resume. If the bullish price structure (shown by the green arrow in the chart) plays out, we envisage the LME nickel price will then have another tilt at $20,000 per tonne in the first half of 2025. But the price may then give in to fresh selling pressure, which could drag it toward the long-term UTL at around $11,500 per tonne.

Conclusion

The main key for LME nickel here is to produce a healthy pullback. LME nickel price currently sits on a technical Fibonacci support at 61.8% of the Jan 2025 low to high. That being said, we still cannot rule out further price weakness, even to retest the January low at $14,905 per tonne.

Still, we are not ready to turn all out bearish and would urge caution that any dip could be a bear trap.

We remain in the camp that LME nickel’s technical configuration offers a great risk-to-reward set-up to the upside over the coming weeks. It has an overly bearish funds positioning, pessimistic market sentiment on electric vehicle (EV) outlook and a long priced-in glut of supply coming out of Indonesia.

Consequently, we think LME nickel is well positioned to venture higher over the next three to six months. But the rebound is likely to be limited to the upside and could well be another opportunity for late sellers to emerge.

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

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