TIN TODAY: Tin can sustain break higher

Short Term:
Medium Term:
Long Term:
Resistances:
R1 19,936 50 DMA
R2 20,140 February 15 high
R3 20,427 100 DMA
Support:
S1 19,420 20 DMA
S2 19,407 200 DMA
S3 18,630 February 7 low
Stochastics:
Legend:

DTL – downtrend line

DMA – daily moving average

Fibo – Fibonacci retracement level

WMA – weekly moving average

RSI – relative strength index

UTL – uptrend line

Analysis

  • Trading in a converging wedge can often indicate indecision among buyers and sellers. Once a directional bias is in place i.e. a breakout, prices will move strongly in that direction.
  • The daily chart indicates that tin prices have broken out of the wedge-like pattern but the action looks weak for now.
  • Still, a close above the 20 DMA should give the bulls more confidence to let the breakout take prices higher.
  • In the event that prices continue to weaken, tin would be vulnerable to further technical selling. It could even take out the February low at $18,630 per tonne.
  • Should that materialise, we would look at $18,000 per tonne as the next psychological support level.
  • The daily RSI remain mixed at 48.36 while the stochastic lines offer little indication if the bullish crossover is able to last and to tread higher.
  • Against such a backdrop, we would not be surprised if tin trades in a range of $19,000-19,700 per tonne.

Macro drivers

The base metals apart from tin are struggling and have consolidated lower. LME tin prices are up 0.77% as of the time of writing. Dwindling LME inventories and a lack of immediate supply response are supportive elements for further advances, we feel.

Tin’s cash/three-month spread is now in backwardation of $75.00 per tonne after last week’s range of $26.00  contango and $15.00b. As well, there is now a dominant warrant holder at 40-49% of available warrants. Judging by the cash/three-months spread, the metal is  tightly held, which is likely to exacerbate the backwardation.

Despite the backwardation in the nearby spread, another 55 tonnes of tin have left Singapore as of March 13. LME stocks have edged lower to 4,585 tonnes and available stocks have dropped to 3,385 tonnes after 235 tonnes of metals were allocated as cancelled warrants. Perhaps the c/3s will need to tighten further to a three-digit number to entice holders to release metal to the LME. Should the backwardation persist in the nearby spread, holders will be reluctant to hold onto material, which could keep tin premiums under pressure.  

After seven straight weeks of decline in the net long fund position (NLFP), the addition of 103 lots has pushed the total to 1,276 lots as of March 3. Money managers have reduced their bullish bets in tin and the decline in gross long position has made room for funds to re-engage on the long side. Shorts were reluctant to rebuild their position, suggesting that sentiment towards tin is not bearish. Instead, profit-taking has been the main agenda; now that it has run its course, fresh buying should support higher tin prices.

Conclusion

The price action in tin is constructive so far; the lack of LME inflows indicates that supply concerns linger. The already low gross long position may entice money managers to re-engage and rebuild their bullish exposure. Against this backdrop, tin prices could push higher and attempt to take out the 50 DMA.

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