Commodity ETFs slowing with reduced volatility

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

iPath DJ-UBS Copper (JJC):
08/10/2012 Closing Price: 43.24
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bearish.
Current Position: FLAT.
Working Orders:
BUY @ 43.76; REVERSAL STOP @ 42.48
Upcoming Break-Even Price: 45.04; Cover 20%
Current Upside Target = 47.91
Projected Weekly Range: 1.54
Trading 128,000 Shares

I.T. ANALYSIS:

  • Upcoming initial trade risk is $163,840 or .33%.
  • JJC is an ETN that holds only a single commodity, the Copper High Grade futures contract.
  • Copper also experienced reduced volatility last week and failed to violate either end of the previous week OVB. Prices currently sit near an oversold price area and are being supported above 2011 lows. The VRCB in tandem with the OVB combination creates an ideal opportunity to buy JJC. Be aware of the relatively small window of opportunity as 42.48 is our REVERSAL STOP price. This week’s trading should be higher as most objectives are pointing higher. If 45.04 trades this week, we recommend covering 20% of the long position.

United States Oil (USO):
08/10/2012 Closing Price: 34.85

INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bearish.
Current Position: FLAT
Current Upside Target = 35.85
Projected Weekly Range: 1.54
Trading 159,000 Shares

I.T. ANALYSIS:

  • USO seeks to replicate the spot price of WTI light, sweet crude oil and primarily holds futures contracts.
  • USO followed through with strong buying then ran into resistance above 35 last week. A new high bar was formed and continued the counter-trend rally. USO failed to trade 50% of the previous top to bottom correction, an ideal place to begin looking for short entries. Strength of the weekly closes, relative to their ranges, is bullish. Price action was also bullish and confirmed by closing above the midrange and open. This week should trade higher, retesting the 35 resistance zone and pushing further to meet our upside price target.

United States Natural Gas (UNG):
08/10/2012 Closing Price: 19.01
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: SHORT @ 20.39 on 08/09/12. STOP @ 22.43
Break-Even Price: 18.35; Cover 20%
Current Downside Targets = 17.27 – 16.36
Projected Weekly Range: 2.22
Trading 100,000 Shares

I.T. ANALYSIS:

  • Initial trade risk was $204,000 or .41%. Current trade risk is the same. Current trade profits are $138,000 or .28%.
  • UNG seeks to replicate the price movement of NYMEX Natural Gas by holding futures contracts.
  • The intraweek rally allowed for our second chance short entry position, which has followed through nicely. The previous week’s OVB was violated to the downside, as expected, and closed in the bottom 1% of the weekly range. Although Friday’s open still has a gap to fill, we believe prices should trade lower, never retracing to 21.36. Trading 18.88 will confirm an I.T. higher top; closing below this price will significantly strengthen our trade. If 18.88 is traded this week, a revised trade STOP will be moved to 21.36.

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