Sunday, June 22, 2014

Weekend Commodities Report: Daily Charts and Commentary

As always some of my calls have been very poor (DBC, SLV, GLD) while others have been superb (UNG, URA, SGG, WEAT). I am must apologize for the dreadful call I made on precious metals. I did rectify it mid week and even bought some myself, but I didn't think it looked strong enough to punch through resistance. Precious metals (SLV and GLD) have entered over-bought territory. 

Agriculture: DBA
DBA is looking strong. I'd list it as a "buy" at the moment. Thank goodness I issued a sell when it taped that first resistance line around $27.80 but it now seems to be in a place to continue going. There's a gap at around $28.00 so I'd put your stops there.

Aluminum: JJU
Presented without comment.

Coal: KOL
The red downward channel seems to be in solid control right now. There's been downward RSI divergence for some time. I do not expect it to stay within the larger upward blue channel. I'd list KOL as "sell."

Coffee: JO
I listed JO as a "buy" some time ago and that recommendation stays. It's in a fairly wide upward channel which is a good sign. Crossovers on the signal lines for almost all the indicators is seen and the RSI(14) has shown a higher low which is often a good sign for a period of ascension.  

Commodities: DBC
My god how could I screw this up so badly. The climb has been extremely narrow and very sharp, two things that make for very unsustainable rallies. I should have listened to the indicators but I didn't and that was my mistake. The chart and the news was giving me every good reason to believe that the declining red channel would remain in control, but this climb is largely a reflection of the sudden developments in Iraq since crude oil and gasoline make up the largest percentage of DBC. I hadn't even realized that most of the country had already surrendered to the insurgents by the time the attack on Mosul began. I issued the instruction to "short/sell" at $26.40 and that's almost precisely when Iraq began appearing in the news. I have no idea what comes next since this trend is unsustainable and quite rare.

Copper: JJC
My recommendation of JJC as a "buy" still stands. It has since broken out nicely and gaped up on Friday which very bullish. Take some profits as we continue to climb towards $38.75.

Corn: CORN
Previously listed as a "buy" and that recommendation holds. It's taken a little while for the bottom to form but now that it has we should see a solid ascent. Pattern here looks suspiciously like WEAT.

Cotton: BAL
BAL was listed as a "weak buy" as I am not a huge fan of it's near horizontal ascent channel. I think a week ago I may even have said, "not really worth our time." That's how I feel, still. All the indicators are up quite positively, momentum is showing going positive movement and yet the price has been "middling." If, for example, this channel were to widen, then we'd have something we could sink our teeth into by just monitoring those rises and falls but as it stands now it looks quite difficult to make money off this in the short term.

Crude Oil: USO
A fantastic article on Notes From the Rabbit Hole on the backwardation of crude oil. The thesis is that future contracts are lower than the current price so one must expect "peace" in Iraq (or something) in the coming months. I issued a "buy" when this mess hit the mainstream wires. I have no idea how much further this will go, but insurgents control the main refinery and currently 3.5 million barrels of oil are offline. This could significantly alter the global recovery. Meanwhile other oil producing regions such as Libya are back in the news with their own problems: only one minor oil refinery is currently producing oil in the entire nation.

USO also happens to find itself in an irrational narrow up-channel. It's about to meet the lower resistance of this rising blue channel but I expect this climb to continue. The problem with developments like this is that it is very frequently impossible to fit the equity to normal channel movements. Maybe a new upward channel will develop now that we have this sudden rise. One carrier group is on it's way to the gulf so we'll see.

Gold: GLD
I issued a short and that was wrong - I'm sorry. Let's follow this to $131.00. One of my favourite writers Clive Maund wrote a great article on the recent movement of gold juniors.

Silver: SLV

Lithium: LIT
LIT is looking like a great "short/sell" at the moment. I expect to the channel to break soon.

Natural Gas: UNG
Sorry for all the lines here but I'm trying something. I listed as a "short/sell" and it did exactly what I expected it too. I met resistance and is traveling towards $24.00 where I expect further consolidation and then a soft breakdown.

Palladium: PALL
PALL and PPLT continue to be shaped by events in South Africa. Recent weakness has emerged but I don't believe my expanded channel will collapse. I continue to list this as a "buy."

Platinum: PPLT
See above. A different pattern than PALL, yes, but an overall upward trend.

Sugar: SGG
Listed as a "neutral" for the immediate term, but longer term listed as a "buy." Wonderful progress has been made and this is exactly what I've been waiting for once it got out of that first descending triangle. Before the breakout continues some consolidation might take place at this second declining line

Soy Bean: SOYB 
Presented without comment.

Uranium: URA
I've tentatively listed URA as a "buy" because I do think it will eventually get out of this red declining channel (it certainly has had enough tests). Let me monitor this on the hourly chart to come up with a more definitive answer but I'm leaning towards positive upward movement.

Wheat: WEAT
A long term bottom has been put in place. Listed as a long "buy."

Jakob Richardon © 2014