Sunday, January 13, 2013

Commodity Run Coming?

Long time no post! Over the past few months I've become significantly busier with my other professional obligations such that I haven't had the time to post anything here or much at all through Twitter. I've made some commitments that should occupy a majority of my professional time which has caused me to have to extend my trading time horizons. No longer having the time necessary to follow the markets tick for tick each day, the setups I discuss and take will generally be those which I feel can sustain 6-18 month holds/moves.

Looking at some charts of the commodities, I believe the past year or so action has been quite constructive and we are setting up for some larger moves across the board.

Taking a look at the CRB/SPX ratio, we are sitting at a significant level of support that's been established over the past decade. We are really sitting at a critical area where a bounce could have some very positive ramifications. Technically, a bounce here would give us a double bottom (W) along with positive divergences both on the RSI and MACD.

Sugar (SB) is one of my favorite current setups. Almost all of the softs have been beaten down and trying to bottom. It is currently sitting just above a 4+ year uptrend line and has been constructing a falling wedge over the past 2 years. The price action has tightened up significantly over the past months with bullish divergences developed in both the RSI and MACD. I'm looking for a break of this wedge with an initial target of 24-26 and PO = 31.60.

Disclosure: Currently long 21 calls expiring in March and April.

Crude (CL) broke its upchannel in 2010 and backtested it early in 2011. Since then, we've seen a sideways base on declining volume. We are currently in a textbook symmetrical triangle with a breakout imminent. A breakout should coincide with a bullish MACD centerline cross and a PO = $120.

Copper (HG), as well, broke its multi-year upchannel late in 2010 and since has been moving sideways into a symmetric triangle. Another case of declining volume, which is what you want to see. MACD is positive, and you want to see the chikou span clear the 3.82 level. PO out of triangle = 4.60.

Was calling for a natural gas (NG) bottom last year and we saw an inverse H&S break. After backtesting the neckline, natty made a b-line for the top of its downchannel. Seeing some hesitation at this level, however, we now have cloud support and should continue to see an extended move. $5 is the key level. The last two candles are quite supportive with bottoming tails at the 30wk MA as well as price holding the kijun-sen. 

If you go back to my last point, I made a pretty nice call on wheat (ZW). It has yet to meet the price target of its bullish wedge breakout of last year which is about the 965 level. I believe we are in a great spot to buy the dip with uptrend support as well as cloud support. Watching the chikou-span, look for a bounce at the prior tenkan/kijun. We may triangulate a bit further before moving higher.