Commodity ETFs see reduced volatility and volume

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

iPath DJ-UBS Copper (JJC):
09/21/2012 Closing Price: 47.92
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bullish.
Current Position: LONG @ 43.67 on 08/21/2012; STOP @ 46.34 OR Weekly Close Below 47.28
Current Upside Target = 47.91 – 52.23
Projected Weekly Range: 2.26
Trading 128,000 Shares; COVERED 25,600 (20%) @ 45.49, COVERED 19,200 (15%) @ 48.20

I.T. ANALYSIS:

  • Initial trade risk was $188,160 or .38%. Current trade risk is $0. Current trade profits are $487,168 or .97%.
  • JJC is an ETN that holds only a single commodity, the Copper High Grade futures contract.
  • JJC saw extreme volatility on Monday as prices soared to 49.17 then fell back down to 47.28. Tuesday through Friday saw very little change and closed out the week slightly below the midrange. Price action was bullish divergent, meaning last week made a higher high and higher low, yet experienced a bearish weekly close. Strong resistance is currently pushing down on JJC; three continuous weekly closes above the Bollinger band hasn’t occurred since 2009. Friday’s close indicates trading should open lower this week while the remainder of the week should be flat to slightly lower. Pay close attention to the current exit prices as they are within the expected weekly trading range.

United States Oil (USO):
09/21/2012 Closing Price: 34.49
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: 2.01
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.
  • The November contract of WTI fell 9% last week, resulting in an equal plummet for USO. Monday fell to 35.23 and Wednesday traded down to 33.96, violating the previous five weekly lows. This trading range would normally be broken down into two or three weeks, indicating a top had formed and a correction had begun. Because this occurred so quickly, we believe this is only an intra-trend price correction and support will keep prices above 32.46. Our longer-term price objectives remain to the upside as we believe the well-established rally will continue towards 38. Although last week’s bearish price action could follow-through to this week, we believe trading will be slightly higher. We remain flat until higher quality trade opportunities arise.

United States Natural Gas (UNG):
09/21/2012 Closing Price: 19.72
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Working Orders: BUY @ 19.83; STOP @ 18.88

Current Upside Target = 23.57 – 24.11
Projected Weekly Range: 1.62
Trading 150,000 Shares

I.T. ANALYSIS:

  • Upcoming initial trade risk is $142,500 or .29%.
  • UNG seeks to replicate the price movement of NYMEX Natural Gas by holding futures contracts.
  • Following a very bullish, weekly confirmation bar, UNG experienced reduced volume and reduced volatility last week. Last week’s range failed to violate the previous week’s high or low, creating an inside vertical bar, while the range of only .93 formed a VRCB. This combination has provided an ideal trade opportunity to buy-in with the I.T. trend. There currently exists a 78% chance of trading 20.66 before 18.16 and Friday’s bullish close confirms this. The first correction following an I.T. trend reversal has proven to be a highly profitable pattern with an above average probability of success. For these reasons, we have issued a working order to BUY 150,000 shares of UNG at 19.83. We will exit the trade on the formation of an OVB at 18.88, a pattern with a one in then chance of occurring.

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