Commodity ETFs look for pullback to go long

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

iPath DJ-UBS Copper (JJC):

08/24/2012 Closing Price: 44.13
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bearish.
Current Position: LONG @ 43.67 on 08/21/2012; STOP @ 42.59
Upcoming Break-Even Price: 45.05; COVER 20%
Current Upside Target = 47.91
Projected Weekly Range: 1.45
Trading 128,000 Shares

I.T. ANALYSIS:

  • Initial trade risk was $188,160 or .38%. Current trade risk is $138,240 or .28%. Current trade profits are $58,880 or .12%.
  • JJC is an ETN that holds only a single commodity, the Copper High Grade futures contract.
  • We entered a long position last Tuesday on a dual VRCB combination. The VRCB provides low risk trade entries and last week’s strong close increased the probability of a successful trade. Price action was clearly bullish last week, closing strong in the upper 25% of the weekly trading range. Once Tuesday traded 43.76, the I.T. trend confirmed a slightly lower bottom and reaffirmed the bearish trend. We believe a bullish trend reversal will occur on the current rally after running into strong resistance near 45.25. Trading should be higher this week with a small probability of correcting back down to our stop of 42.59.

United States Oil (USO):

08/24/2012 Closing Price: 35.68
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bearish.
Current Position: FLAT
Working Orders:
SHORT @ 35.48; STOP @ 36.46
Upcoming Break-Even Price: 34.50; Cover 20%
Current Upside Target = 35.85 – 37.87*Extended Upside Objective
Projected Weekly Range: 1.33
Trading 159,000 Shares

I.T. ANALYSIS:

  • Upcoming initial trade risk is $155,820 or .31%.
  • USO seeks to replicate the spot price of WTI light, sweet crude oil and primarily holds futures contracts.
  • We stated back in July that any rally above 35 would be analyzed for optimal short entry positions. Last week, USO formed a VRCB at the top of an I.T. rally above 35. We strongly believe this is a great opportunity to take advantage of a low-risk trade. We are issuing a short position at 35.48 with a STOP at 36.46. To further limit risk, if 34.50 trades this week, we will cover 20% of our position. Price action last week was bullish divergent. Although USO made higher highs and lows, Friday closed below it’s open, weekly midrange, and previous close. These indicators, paired with the change in short-term rate of change, lead us to believe trading will be to the downside this week. 

United States Natural Gas (UNG):

08/24/2012 Closing Price: 18.38
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: SHORT @ 20.39 on 08/09/12. STOP @ 20.39
Current Downside Targets = 17.27 – 16.36
Projected Weekly Range: 1.56
Trading 100,000 Shares; COVERED 20,000 @ 18.35

I.T. ANALYSIS:

  • Initial trade risk was $204,000 or .41%. Current trade risk is $0. Current trade profits are $201,600 or .40%.
  • UNG seeks to replicate the price movement of NYMEX Natural Gas by holding futures contracts.
  • We covered 20% of or position last week, locking in $40,800 in profits. Our STOP price has been moved down to our entry price, guaranteeing a profitable trade. UNG displayed slightly bearish price action last week, barely making lower highs and lows while firmly closing out the week in the bottom 3% of the weekly range. If strong selling resumes early this week, look for 17.35 to trade by Friday. UNG is only .11 off our August low projection, any movement past this price is beyond our estimates. We still believe the previous bottom of 15.18 will not be violated on the current correction.

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