Commodity ETFs face fresh upside targets

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

PowerShares DB Agriculture (DBA):
08/03/2012 Closing Price: 30.04
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT.
Current Upside Targets = 31.27 – 31.87
Projected Weekly Range: .89
Trading 100,000 Shares

I.T. ANALYSIS:

  • DBA is a comprehensive agricultural ETF. Holdings include fairly equally-weighted futures contracts in sugar #11, live cattle, corn, soybeans, cocoa, coffee, lean hogs, wheat, and cattle feeder.
  • DBA continued to show indecisive movement last week as it gap higher opened Monday and sold off to close out the week. Price action was bullish yet Friday’s close below the open and near the previous two weeks’ close indicates an I.T. top may have formed. Buyers and sellers offset each other last week creating a reduced volatility compression bar, meaning bears have begun to overpower bulls. 86% of the upside target has already been achieved; look for a potential sell-off. If this week trades below 29.73 before violating 30.44, look for a longer term correction to the downside.

iPath DJ-UBS Grains (JJG):
08/03/2012 Closing Price: 62.38
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT.
Current Upside Target = 70.95
Projected Weekly Range: 4.50
Trading 100,000 Shares

I.T. ANALYSIS:

  • JJG is concentrated in agricultural grain futures, holding 46% soybeans, 30% wheat and 24% corn.
  • Last week saw mixed signals for JJG. After Monday gap opened to the upside the remainder of the week was largely to the downside. Friday’s close around the weekly midrange paired with the lower high and higher low are all signs of sideways movement. The short-term trend is consolidating, violating few highs and lows and seeing reduced daily ranges. Current conditions are poor indicators of upcoming price action although we still see greater upside potential. If the trend obtains and a correction down to 55 is realized, we will actively be looking for optimal buy entries.

SPDR Gold Shares (GLD):
08/03/2012 Closing Price: 155.55
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bearish.
Current Position: LONG @ 155.33 on 07/25/12. STOP = 152.39
Break-Even Price: 158.27
Current Upside Target = 165.88
Projected Weekly Range: 4.07
Trading 100,000 Shares

I.T. ANALYSIS:

  • Initial trade risk was $237,000 or .47%. Current trade risk is $294,000 or .59%. Current trade profits are $22,000 or .04%.
  • GLD’s single holding is gold bullion.
  • Although GLD traded with greater than average volume last week, directional movement was nearly nonexistent. The early sell-off was offset on Friday by a moderate rally, closing out the week near the midrange. The 90% probability of seeing 157.97 before 152.19 is still in effect. Our break-even price of 158.27 is yet to be achieved, where we believe in exiting 20% of our current position. Look for this week to push prices higher, with only a small probability of retesting June lows.

iPath DJ-UBS Copper (JJC):
08/03/2012 Closing Price: 42.61
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bearish.
Current Position: FLAT
Current Upside Target = 47.91
Projected Weekly Range: 1.63
Trading 100,000 Shares

I.T. ANALYSIS:

  • JJC is an ETN that holds only a single commodity, the Copper High Grade futures contract.
  • After trading above the previous week’s high of 43.66, JJC sold off to also violate the low of 42.36, creating an outside vertical bar. This bar pattern normally leads to a continuation of selling, with 41.69 being traded before 43.76. Friday rallied back towards the weekly midrange and closed out strong. New 2012 lows were also seen last week as the June support price of 41.74 was barely violated, reversing the I.T. trend to bearish. The short-term trend is also bearish while the major-term trend is bullish. These mixed signals and trends support our decision to patiently wait for higher quality trade entries.

United States Oil (USO):
08/03/2012 Closing Price: 34.07

INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bearish.
Current Position: FLAT
Current Upside Target = 35.85
Projected Weekly Range: 1.80
Trading 100,000 Shares

I.T. ANALYSIS:

  • USO seeks to replicate the spot price of WTI light, sweet crude oil and primarily holds futures contracts.
  • USO never violated the previous week’s low of 32.45 which would have confirmed a lower top and bearish trend. Instead, it retested the low then rallied to close out Friday near the top 10% of the weekly range. Priced traded higher as expected and should continue to this week. Look for a retest of 34.84 this week and strong resistance around the 35 price level. If Friday’s gap higher open and strong rally fails to maintain momentum, look for an intra-week sell off down to 33.04. Be aware there is a very small probability of actually violating last week’s low of 32.46, but if this occurs, a new I.T. top is likely to form.

United States Natural Gas (UNG):
08/03/2012 Closing Price: 19.77
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT. Sell @ 20.39; Stop @ 22.43
Upcoming Break-Even Price: 24.47
Current Downside Targets = 17.27 – 16.36
Projected Weekly Range: 2.11
Trading 100,000 Shares

I.T. ANALYSIS:

  • Upcoming trade initial risk is $204,000 or .41%.
  • UNG seeks to replicate the price movement of NYMEX Natural Gas by holding futures contracts.
  • Last Monday, UNG gap higher opened and immediately took out the previous week’s high. It then proceeded to fall back down and close below the previous week’s low. The two-week combination pattern of a reduced volatility compression bar and an outside vertical bar provides an ideal selling opportunity. There are significant probabilities that this week will continue to sell-off and form a longer-term correction. Look to enter long positions with the trend within our downside price target range. If this week rallies back to 20.39, we will enter a low risk short position.

CurrencyShares Euro Trust (FXE):
08/03/2012 Closing Price: 123.05

INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bearish.
Current Position: FLAT. Buy @ 122.23; Stop @ 119.72.
Upcoming Break-Even Price: 124.74
Current Upside Target = 125.59
Projected Weekly Range: 2.48
Trading 100,000 Shares

I.T. ANALYSIS:

  • Upcoming initial trade risk is $251,000 or .50%.
  • FXE seeks to track the movement of the Euro currency.
  • With two strong weekly closes, FXE is beginning to see moderate support. The previous week’s outside vertical bar high was violated as expected and closed in the upper 5% of the weekly range. Look for 123.75 early this week with a low probability of trading 120.64. Momentum and intrinsic strength indicators are now reversing, counter to the bearish trend. We believe the market has provided a second chance opportunity to enter a long position with a short-term time horizon at 122.23. Our longer-term objectives are still to the downside and thus look for short entry opportunities off an I.T. rally near our upside price target.

iShares MSCI Emerging Markets Index (EEM):
08/03/2012 Closing Price: 39.93
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bullish.
Current Position: FLAT.
Current Upside Target = 42.48
Projected Weekly Range: 1.87
Trading 100,000 Shares

I.T. ANALYSIS:

  • EEM seeks to replicate the performance of the MSCI Emerging Markets Index by investing in the underlying international securities.
  • Emerging markets saw some of the strongest support last week, outperforming nearly every domestic index. Price action was definitively bullish last week, never correcting down to the previous week’s midrange. Trading should be higher this week with a good chance of seeing 41. The sideways accumulation pattern has remained with a restricted range since May and we believe this bullish movement could lead to a longer-term breakout. If the I.T. rally continues, we will look for low risk, high quality buy entries.

SPDR S&P 500 (SPY):
08/03/2012 Closing Price: 139.35
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT.
Current Upside Targets = 141.19 – 144.02
Projected Weekly Range: 4.58
Trading 100,000 Shares

I.T. ANALYSIS:

  • SPY continued its awkward bullish pattern last week, rallying off an intra-week correction. The short-term trend has remained within a channel system since early June without fail, maintaining higher tops and higher bottoms. The I.T. trend has been less predictable, consistently making higher highs yet frequently violating previous weeks’ lows. We believe these trends will continue this week; look for another short-term sell off and rally to follow. Our conservative price target has already achieved 85% and with continued bullish price action, we believe 100% will be achieved by the end of August. If the current trend obtains, our aggressive price target should be realized by Q3 end.
About the Author
Jim Parrish and Kris Hicks

Parrish Hicks Capital Research is a trading and technical analysis firm that specializes in Energy and Metal commodity futures. The two founders, Jim Parrish and Kris Hicks, have a combined 38 years’ experience in the commodity business and in 2011 accurately forecasted both $25 moves to the downside in May and July and the $25+ move to the upside in October. They also called the all-time high day for Gold on September 6, 2011 and forecasted a projected downside target of 1528.10 in March 2012.  Their trading methodology has a high degree of accuracy which confirms tops/bottoms, projected trading ranges and projected targets for those ranges. Their expertise is focused on 16 commodities plus the comparable ETF markets. You can reach them at Jim@ParrishHicks.com and Kris@ParrishHicks.com or at www.ParrishHicks.com.

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