Throughout February, nickel quotes consistently moved in a downtrend. Two attempts to break the trend line from the bottom up were unsuccessful, and as a result, nickel prices reached their lows since mid-November. At the same time, technical indicators still don't give a signal of oversold, and from a fundamental point of view, the downside potential of nickel quotes may not be exhausted yet.
According to International Nickel Study Group (INSG) data, the world market of this metal may come from a deficit to a stable surplus soon. Calculations of INSG showed that in 2022, the supply of nickel, a key element for electric car batteries, exceeded its demand for 112,000 tons.
At the same time, the data of the London Metal Exchange (LME) shows a decrease in registered nickel reserves by almost 20% since early this year. However, experts say that this data doesn’t indicate a shortage of metal but an increasing separation of the dynamics of trading in the London market from the real supply chains of nickel.
The sharp change in the state of the nickel market from deficit to surplus is primarily related to Indonesia. According to INSG, metal production in this country increased by 48% over the past year. Investment from China and Western countries continues to flow into Indonesia, and Western electric vehicle battery makers are struggling to catch up and overtake Chinese companies. All this suggests that the nickel boom in Indonesia won’t end soon.
The idea of opening the short positions in nickel near the uptrend’s lines looks interesting in the current situation now, it is a little higher than 25500. Further descent to new local lows may follow, and the first target is the lowest levels of the last days in the range of 24300-24400.
We may offer you the following option of trading strategy:
Sell nickel when climbing in the range of 25500 - 25600. Take profit 1 — 24800. Take profit 2 — 24400. Stop-loss — 26000.
Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.
This content is for informational purposes only and is not intended to be investing advice.
