Commodity ETF technicals show room for growth

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

CurrencyShares Euro Trust (FXE):
08/17/2012 Closing Price: 122.59

INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bearish.
Current Position: LONG @ 122.23 on 08/09/12. STOP @ 121.70
Break-Even Price: 124.74; Cover 20%
Current Upside Target = 125.59
Projected Weekly Range: 1.86
Trading 100,000 Shares

I.T. ANALYSIS:

  • Initial trade risk was $251,000 or .50%. Current trade risk is $53,000 or .11%. Current trade profits are $36,000 or .07%.
  • FXE seeks to track the movement of the Euro currency.
  • FXE gave very little feedback last week as volatility and price action were both nondirectional. Total trading range was 1.08 last week, the lowest in over two years, forming a VRCB. The lower high and higher low paired with a close near the midrange indicate very little for future price action. 121.70 is an important number to watch this week; not only will it stop out our trade but will also confirm a top, signaling the rally is over. We would like to see our upside price objective achieved before entering a short position, although with such a weak euro, this I.T. rally may be all we can get.

iShares MSCI Emerging Markets Index (EEM):
08/17/2012 Closing Price: 40.47
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bullish.
Current Position: FLAT.
Working Orders
: SHORT @ 39.97; STOP @ 40.79
Current Upside Target = 42.48
Projected Weekly Range: .98
Trading 135,000 Shares

I.T. ANALYSIS:

  • Upcoming initial trade risk is $110,700 or .22%.
  • EEM seeks to replicate the performance of the MSCI Emerging Markets Index by investing in the underlying international securities.
  • Emerging markets struggled to establish any form of directional movement last week. Price action was null with a lower high and higher low; Friday’s close was near the weekly midrange. For the second week in a row, a VRCB has formed at the top of the current rally. Prices seem to be encountering heavy resistance, making new highs of less than 1.00 in the last 9 weeks. 40.73 marks the 50% rally price from the previous top to bottom correction. We believe this is a strong resistance price and that current market conditions will prevent a 100% rally. If trading is higher this week, we will continue look to enter a short position.

SPDR S&P 500 (SPY):
08/17/2012 Closing Price: 142.18
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT.
Current Upside Targets: 145.55 – 147.05
Projected Weekly Range: 2.56
Trading 39,000 Shares

I.T. ANALYSIS:

  • SPY made new four-year highs last week and showed very bullish price action. The higher high and higher low indicates trading should be up this week, closing in the upper 10% and above the previous week’s high confirm the trend. Our conservative price objective should be achieved by the end of August; if momentum and strong closes continue, look for 147.05. The channel system that has seen 98% of the last 11 week’s trading range has failed the last two weeks. Although we believe only a low probability exists, if a correction does begin, look for 135.85. Long entry positions will follow any correction of at least 8 points.
About the Author
Jim Parrish, Kris Hicks and Robert Calhoun

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.

IMPORTANT DISCLOSURE

Transactions in ETF (Exchange Traded Funds) carry a high degree of risk. This material is not intended as an offer or solicitation for the purchase of any financial instrument. The data and these comments are provided for information purposes only and may or may not be intended to be used for specific trading strategies. ETF trading is risky and Parrish Hicks Capital Research assumes no liability for the use of any information contained herein. Any examples are strictly hypothetical and no representation is being made that any person will or is likely to achieve profits or losses similar to those examples. ETF strategies mentioned herein may not be suitable for all investors. The opinions and recommendations herein do not take into account individual client circumstances, objectives or needs and are not intended as recommendations of a particular ETF or ETF strategies to a particular client. The recipient of this report must make his own independent decisions regarding any ETF instrument to a particular client.

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