TIN TODAY – Dull price action, upside capped by forward sellers

Short Term:
Medium Term:
Long Term:
Resistances:
R1 18,345 Feb 2015 high
R2 20,000 Psychological level
R3 20,100 Jan 2015 high
R4 22,000 Current high
R5 23,849 Apr 2014 high
Support:
S1 20,900 20 DMA
S2 20,713 50 DMA
S3 19,877 100 DMA
S4 15,200 Dec 2015 high
Stochastics:
Legend:

DTL = Downtrend line

UTL = Uptrend line

DMA = Daily moving average

WMA = Weekly moving average

Fibo = Fibonacci retracement level

Analysis

Weekly

  • The recovery rally in tin prices is still very much robust forma longer-term perspective.
  • Judging by the recent weekly candles, buying momentum has somewhat stalled but selling has been mild too.
  • The weekly RSI has moved away from being overbought and has established the conditions for prices to surge again.
  • As well, the stochastic slow line is attempting a bullish cross of the slow line. Given the positive fundamentals and strong uptrend momentum, we cannot rule out a resumption in buying.

Daily

  • Tin remains in the high ground while it consolidates recent gains.
  • The price action remains bullish as long as it stays above the 20 DMA.
  • The 50 DMA is the next nearby support level if tin prices trade below the 20 DMA.
  • Meanwhile, its daily RSI is treading above the median line and the stochastic lines remain elevated, with no sign of selling pressure.

Macro drivers

Global macroeconomic conditions have stabilised and in recent months showed a marked improvement that has boosted confidence, convincing market participants to return to the commodities sector. Tin is no exception – it rallied by 68.1% to its 2016 high of $22,000 per tonne from the January low at $13,085 per tonne.

On the speculative front, money managers have turned somewhat polarised. Since their respective lows in August at 1,989 lots and 4,574 lots, the shorts and longs have lifted their positions to 2,829 and 5,256 lots. But the net long fund position (NLFP) has edged lower, which indicate that shorts are getting slightly bolder. The latest LME COT report showed that shorts added another 74 lots, which was off-set by fresh buying of 26 lots. If tin prices fail to push higher, there is a risk of stale long liquidation.

LME inventories are recovering albeit at a slow pace – 465 tonnes came onto the LME in December. Still, the net result is positive – there were only 320 tonnes of outflow. Stocks stand at 3,330 tonnes and available stocks at 2,400 tonnes. If this momentum is maintained, this could be the second consecutive month of net inflow after November when 680 tonnes were delivered in and 390 tonnes were delivered out.

The heavily backwardated nearby spreads have been a contributory factory drawing metal onto the exchange. C/3s has eased considerably to $82b since the start of the trading month at $260b. Still, the two dominant warrant holders have raised their collective position to 70-88% from 60-78%. If the metal is in tight hands, the easing in this spread may be short-lived.

Conclusion

Judging by its sideways price action, the tin market is not in a rush to register a fresh 2016 high or to slip back below $20,000 per tonne. There is sufficient dip-buying interest to keep the bullish momentum going while selling interest remains mild. As the end of the trading year nears, we expect prices to consolidate above $21,000 per tonne for now but there is a risk of mild profit taking.

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