Commodity ETFs look for pullback to go long

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

KEY TERMS

OVB:  Outside Vertical Bar
VRCB: Volatility Reduced Compression Bar

Core Position:
$50,000,000

PowerShares DB Agriculture (DBA):

08/24/2012 Closing Price: 29.91
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Current Downside Targets = 27.94 – 27.40
Projected Weekly Range: .49
Trading 185,000 Shares

I.T. ANALYSIS:

  • Initial trade risk was $138,750 or .28%. Current trade risk is $99,900 or .20%.
  • 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.
  • Following three consecutive VRCBs, DBA rallied early last week on the bullish momentum of wheat, corn and soybeans. Commodity prices then fell back down to Monday prices with DBA closing out below the midrange and slightly above the open. Price action is bullish divergent, establishing a much higher-high and higher-low. Friday’s close in the bottom quartile is a bearish indicator showing short-term resistance near an I.T. top. The complete failure to violate 30.44 in the last three weeks leaves us bullishly optimistic as we still believe the ag’s have greater upside potential. A correction down to our current price target range will be ideal for entering a long position.

iPath DJ-UBS Grains (JJG):

08/24/2012 Closing Price: 63.45
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: LONG @ 62.25 on 08/20/2012; STOP @ 62.25
Current Upside Target = 70.95
Projected Weekly Range: 2.69
Trading 87,000 Shares; COVERED 17,400 @ 64.45

I.T. ANALYSIS:

  • JJG is concentrated in agricultural grain futures, holding 46% soybeans, 30% wheat and 24% corn.
  • Initial trade risk was $191,400 or .38%. Current trade risk is 0%. Current trade profits are $121,800 or .24%.
  • We entered our long position last Monday coming off a low-risk VRCB buy signal. Initial risk was so low that we also covered 20% of our position the following day at 64.45 and moved our STOP to the entry price of 62.25. Price action for JJG was exceptionally bullish yet Friday’s close near the midrange wasn’t as strong as we had hoped. Currently trading at prices not seen since July 2008, we believe JJG still has greater upside potential and will meet our upside target within the near future. Look for slightly higher trading this week with the slight probability of a substantial breakout.

SPDR Gold Shares (GLD):

08/24/2012 Closing Price: 161.97
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bullish.
Current Position: FLAT
Current Upside Target = 165.88
Projected Weekly Range: 3.56
Trading 35,000 Shares

I.T. ANALYSIS:

  • GLD’s single holding is gold bullion.
  • GLD finally made a considerable move through the long-term resistance level of 158. We have been waiting for this bullish move since mid-June when we first reported on the high probability of seeing 160 before retesting yearly lows yet just missed our buy entry put out last week after gapping higher Tuesday. Price action was very bullish as GLD displayed the strongest I.T. buying pressure since the week ended June 1, 2012. Friday’s close in the top 10% of the weekly range indicates 163.02 should trade this week. Last week also confirmed a lower bottom had finally formed, reversing the I.T. trend to bullish. If momentum continues and our upside target is achieved, look for a revised, more aggressive price target to follow.

In this morning’s ETF Intermediate Weekly Report on (GLD), our current gold position was indicated as FLAT based off missing the fill price issued in last week’s report trying to go LONG this market at 157.81. This is due to the fact that this report only goes out once per week on Monday with no updates intraweek to our non-paying viewers. It is important to note, however, that our intraweek signal did get filled LONG this market on Tuesday’s GAP opening at 158.81 after violating the high of the week ending 08/10/12 of 157.82 which our subscribed clients were privy to with intraweek updates that are distributed when necessary.

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