Nickel May Drop to $13,850 on Moving Average: Technical Analysis

Nickel, which entered a bear market this month, will probably decline further to the lowest level since June 2009, according to Trading Central SA.

Futures may drop about 7.9 percent to $13,850 a metric ton over the next month, said Ludwig Garric, Paris-based head of Commodity Research, who correctly predicted the rally in soybeans to a record last year.

“The near-term outlook favors the bear camp,” Garric said in an e-mail dated yesterday. The 20-day moving average has slipped below the 50-day moving average and both are heading lower, turning into areas of resistance, he said. Prices are making successive lower-highs and lower-lows, signaling a bearish trend, he said.

Moving averages point to changes in price trends. When a short-dated average breaks below a longer one, the move suggests that prices may decline, and vice versa. Resistance levels are marked by clusters of sell orders, according to technical analysts, who say that past moves may be used to predict trends.

Nickel for three-month delivery traded at $15,040 on the London Metal Exchange at 1:58 p.m. in Singapore. The 20-day moving average was $15,445 and the 50-day average was $16,183.

In technical analysis, investors and analysts use charts of trading patterns and prices to predict changes in a security, commodity, currency or index.