Nickel goes to January’s low

Nickel quotes have gradually lost all the growth received in the second half of January, and they are less than 2% from the low at the beginning of the year, which is at a 25800 point. However, the decline may not stop there, since there is another target below — the level of 25000. The bears will try to reach it within the next few days. 

Nickel, like other industrial metals, has previously been rising in price on expectations of increased demand from China. However, Chinese imports of main commodities have yet to show any significant uptick, even though it remains at a relatively high level. The economic recovery is uneven and will likely require further targeted steps from the Chinese authorities.

As for the offer of nickel, it shows a clear upward trend. China’s nonferrous metals industry association believes that it happens because the world market is oversaturated with increased supplies from Indonesia. Goldman Sachs has issued a bearish outlook for several metals, including nickel, cobalt, and lithium, which is also related to their sharp production growth in recent years.

Due to a mismatch between supply and demand, a surplus of metal appeared on the nickel market, and it contributed to an even bigger reduction in prices. According to analysts at Norilsk Nickel, there will be an oversupply on the world market of about 120 thousand tons this year: 3.47 million tons of nickel will be produced, while demand will reach only 3.35 million tons of metal.

The RSI indicator is gradually decreasing but is still very far from the oversold zone. Thus, from a technical point of view, nickel has all the prerequisites for continuing the decline to the levels of 25800 (January low) and 25000 (local November lows). Further, some upward rebound is possible, but it needs a significant fundamental positive.

We may offer you the following option of trading strategy: 

Sell nickel in a range of 26200 — 26500. Take profit 1 — 25800. Take profit 2 — 25000. Stop-loss — 27000.

Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.