Metals ETFs bullish following QE3 backing

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

iPath DJ-UBS Grains (JJG):
09/14/2012 Closing Price: 63.52
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Current Upside Target = 70.95
Projected Weekly Range: 2.21
Trading 87,000 Shares
I.T. ANALYSIS:

  • JJG is concentrated in agricultural grain futures, holding 46% soybeans, 30% wheat and 24% corn.
  • The grains failed to maintain the upward momentum last seen in late July and stopped out our long position at our entry price. After locking in $32,280 in profits, Tuesday traded down to 62.25, exiting the remaining 80% of our position at break-even. Price action was bearish divergent, meaning last week’s range had a lower high and lower low, yet rallied to close out the week above the midrange. Last week also confirmed an I.T. top had formed, yet Friday’s close did not confirm the correction. Nondirectional movement and sporadic volatility has resulted in the current flat position with no upcoming entries.

United States Oil (USO):
09/14/2012 Closing Price: 36.84

INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bearish.
Current Position: FLAT
Current Upside Target = 35.85 – 37.87*Extended Upside Objective
Projected Weekly Range: 1.36
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 failed to establish a proper correction and continued the rally which began in June. Although our short trade followed the I.T. trend, buying pressure stopped out the position. Last Friday, the October contract of crude light broke through $100 per barrel, a price not seen since early May. We believe prices will continue higher toward our long-term price target of 37.87. Price action was bullish and confirmed by a strong Friday close. Last week’s high of 37.17 was only .06 away from a 61.80% correction, a highly correlated Fibonacci rally retracement price. If this coming week displays strong buying pressure, a revised upside target will be established. If this week fumbles and trades lower, look for a potential correction below 35 to follow.

United States Natural Gas (UNG):
09/14/2012 Closing Price: 19.96
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Current Upside Target = 25.43
Projected Weekly Range: 1.72
Trading 100,000 Shares
I.T. ANALYSIS:

  • UNG seeks to replicate the price movement of NYMEX Natural Gas by holding futures contracts.
  • Of the five trading days, Friday’s close is most highly correlated to the following day’s trading direction. The previous Friday’s close in the bottom 10% results in an 82% probability of trading lower the following Monday. Unfortunately for out short position, the odds failed to follow through, exiting the trade at 19.78 on Tuesday’s gap higher open. Final trade profits were $89,600 or .18%. UNG displayed strong bullish price action last week with a higher low and much higher high. Price action was confirmed by Friday’s strong close above the midrange and above the previous week’s high. This formed an I.T. higher bottom and continued the bullish I.T. trend. Expect trading to be higher next week with the expectation of achieving our upside target by October 27, 2012.

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