TIN TODAY: Looking bullish again as LME stocks drop below 4,000 tonnes

Short Term:
Medium Term:
Long Term:
Resistances:
R1 19,538 20 DMA
R2 19,550
R3 20,140 Feb rebound peak
R4 20,680 Former support
R5 20,850 Jan 24 high
R6 20,853 RL
Support:
S1 19,840 HSL
S2 19,538 20 DMA
S3 19,200
S4 18,907
S5 18,775 Feb 23 low
S6 18,745 Feb 7 low
S7 18,594 38.2% Fibo (2016 rally)
Stochastics:Bullish
Legend:

BB – Bollinger band

DMA – daily moving average

Fibo – Fibonacci retracement level

H&S – head-and-shoulder pattern

RL – resistance line

U/DTL – up/downtrend line

Analysis

  • Tin’s January-February sell-off appears to have put in a ‘W’-shaped bottom and prices are now rebounding robustly. Former support starts at $20,680 per tonne – the bottom of the December sideways trade. The RL from that sideways range is at $20,853 per tonne – clearance of that level would then start to challenge overhead supply seen between November and mid-January. 
  • The stochastics are bullish but they do not look overly strong.
  • The move above $20,140 per tonne bodes well; we now wait to see how much overhead supply is still around above $21,000 per tonne.

Macro issues

LME stocks are drifting lower again and have dropped below 4,000 tonnes to 3,965 tonnes as of Monday March 20. Net outflow has picked up since the start of March, averaging 114 tonnes per day (tpd), compared with 12 tpd in February and increases of 98 tpd on average in January.

The LME cash/three-month spread is tightening again significantly. It was recently quoted at $135-155 per tonne backwardation, having flipped from a contango on Wednesday March 8 and having averaged $55b per tonne from Monday to Thursday last week.

The larger holder of LME warrants has returned; one entity holds 30-39% of the warrants and one entity holds tom and cash date positions equivalent to 30-39% of the size of the warrants. 

Conclusion

We remain quietly bullish for tin prices. LME stocks are concentrated in few hands, stocks are leaving warehouses again, the spread has tightened and the chart is looking bullish again. We wait to see how much supply there still is in the $21,000-22,000 per tonne area.

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

About Kathleen Retourne

Kathleen has been reporting on commodity markets since 2006. She joined FastMarkets in 2011 and has immersed herself into the metal industry, specialising in LME coverage. Follow her on twitter @kathretourne