The Character of the commodity complex is improving. Each week NFTRH has maintained the ‘bear market’ stance, and that is of course still the case. But there was the pesky chart of crude oil, which looked constructive (and has only improved). Then there is XLE, for the general energy sector. I am still waiting on that one for a pullback and if the commodity bounce still looks viable, will consider a position.
But it is not just energy that is moving. The broad commodity market seems to be saying that it may have bottomed for more than the typical bounce. It can only be called a bear market rally at this time, but it could turn out to be a fairly strong one. Even a counter-trend rally can be its own trade-able cycle within a bear.
Regardless, the bounce is showing good staying power. Here is the DBC Commodity ETF, which has some interesting views. First the daily, which has risen from the consolidation flag it had been in (much like crude oil) to a short-term resistance point. A break through that area that holds a couple of days could signal a run to the SMA 200 and wouldn’t you know it, the measured target of the pattern is 17, right around the SMA 200.
The question now is will it pull back first? I don’t have that answer but I can tell you that if you are a commodity bull (even if for a trade) a pullback buy level is around the SMA 50 (currently 15.25).
The weekly view shows resistance going back to early 2015 and is in confluence with, yup, the 17 area target. AROON is down but MACD and RSI have very nice divergences.
I used DBC as the commodities example, we also have XLE going and one could apply the same general parameters to crude oil or other individual commodities. We’ll cover more of them in the weekly report if things continue to look constructive. Also, leveraged commodity funds could be used (to the extent they exist) with the above noted DBC parameters as a guide.
Buy Target: A pullback to around 15.25 would be optimal. One might think about a partial starter position at current levels and a plan to add a pullback, or possibly a break above resistance.
Sell Target: 17; this is just a measurement. A strong bear rally could go higher.
Stop Loss: Below 14.80
A reminder that chart based NFTRH+ updates are just trade setup ideas, which may not be revisited as the parameters are already noted. They are meant as a starting point for further research if interested. Fundamentals-based ideas are also provided for your further research only. I will not personally buy every item highlighted and will sometimes sell – without prior notice (because this takes time and resource away from NFTRH’s main functions) – any item that I do buy, below target, which is something I often do as a trader. Also please be aware that I am not a fundamental stock analyst.