Nickel Price Set To Rally 16% To $20k on Improved Technicals

Summary:

The Nickel price is primed for another attempt at $20,000 per tonne after breaking above key technical levels.

The Nickel price is primed for another attempt at $20,000 per tonne after breaking above key technical levels.

The industrial metal, unlike its high-flying peers Copper and Aluminium, had struggled of late. Reaching a high of $20,107 in late February, it looked likely that the Nickel price would continue to run higher as investors positioned themselves for a new commodity super-cycle.

The Global push for carbon neutrality had helped the Nickel price rally 85% from its March 2020 lows of $11,270 through February 2021.

A major component in the lithium-ion (Li-Ion) batteries used to power electric vehicles, nickel witnessed renewed investor interest at the start of the year.

With the end of the combustion engine growing ever-nearer, auto-makers are rapidly expanding their EV model offerings.

With structural demand set to grow and production deficits expected, the London Metal Exchange Nickel price seemed ripe to test the April 2014 highs of $21,600.

What happened?

After reaching the February peak, the price fell 22% in the following three weeks. Sentiment suffered as China’s Tsingshan Holdings announced the provision of 100,000 metric tonnes to domestic consumers.

This announcement was in contrast to the widely held belief that Nickel producers were running at full capacity.

The subsequent sell-off saw the Nickel price correct to $15,670 per tonne. The market averted further declines as buyers stepped in ahead of the support of the 200-Day Moving Average at $15,540.

Nickel Price Outlook

Since the decline in March, the Nickel price has experienced a period of consolidation. Trading in April has seen the price confined in the $15,800 to $16,800 range.

This range saw the creation of a ‘Bear Flag’ formation on the daily chart. The upper end of the range was held in place by the 50-Day MA, currently at $16,874, with the lower end supported by the 200-Day MA (currently $16,157).

In mid-April, the resolve of bulls was tested, as the market spent four sessions straddling the important 200-Day MA circa $16,000.

Just as the Nickel price was starting to appear vulnerable, the market ripped higher, posting a 10% rally over four trading sessions, clearing both the 50-Day and 100-Day ($17,295) averages.

With the Nickel Price now trading above these key technical levels, I expect the market to retest 2020 highs at $20,107.

This would represent a $16.5 increase from the current price of $17,315. A close below the 50-Day moving average at $16,8744 would negate the bullish call.