Metals, grains ETFs face possible downside corrections

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

iPath DJ-UBS Copper (JJC):
10/05/2012 Closing Price: 47.68
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bullish.
Current Position: LONG @ 43.67 on 08/21/2012; STOP @ 46.63 OR Weekly Close Below 47.57
Current Upside Target = 47.91 – 52.23
Projected Weekly Range: 1.49
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 $467,200 or .93%.
  • JJC is an ETN that holds only a single commodity, the Copper High Grade futures contract.
  • Last week added to the open equity of our long position in JJC. Currently our most profitable trade, profits stand at $467,200 or 0.93% of our core position. Trading was higher last week, as expected, resulting in bullish divergent price action. The weekly close in the bottom 10% of the trading range was because of extremely volatile trading on Friday, whose range was four times greater than the average daily range. The exclusion of Friday’s abnormal volatility would have resulted in a VRCB, a bearish indicator near the top of a bull rally. This leaves us believing trading will be lower this week; if 46.63 trades before 49.18, a top will form confirming a correction has begun.

United States Oil (USO):
10/05/2012 Closing Price: 33.35
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: 2.22
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.
  • 31.68
  • After a strong weekly close the previous week, USO gap opened Monday and violated the previous week’s high. Tuesday and Wednesday saw prices fall back down to below the previous week’s low, resulting in an OVB (Outside Vertical Bar). Thursday rallied back up while Friday fell back down, closing out the week slightly below the weekly midrange. Such abnormal volatility without establishing a definitive direction results in very mixed signals and poor forward-looking analysis. Although we do believe the current correction will continue slightly lower, finding support above 31.68, our current upside price target still reflects our long-term outlook.

United States Natural Gas (UNG):
10/05/2012 Closing Price: 21.80
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: LONG @ 19.83 on 09/25/12. STOP @ 20.65 OR Weekly Close Below 21.47
Upcoming Cover:
COVER 22,500 (15%) @ 23.57 
Current Upside Target = 23.57 – 24.11
Projected Weekly Range: 1.46
Trading 150,000 Shares; COVERED 22,500 (15%) @ 21.98

I.T. ANALYSIS:

  • Initial trade risk was $142,500 or .29%. Current trade risk is $0. Current trade profits are $299,550 or .60%.
  • UNG seeks to replicate the price movement of NYMEX Natural Gas by holding futures contracts.
  • UNG traded higher, as predicted last week, gap opening Monday at 21.98 where we covered 22,500 shares. In only two weeks, the current long trade has nearly $300,000 in open and closed equity. Our trade entry was based on a highly profitable, low risk pattern which allowed a second-chance opportunity to buy the first correction after a bullish trend reversal. Price action last week was very bullish, never retracing back to the previous week’s trading range. Friday’s close was divergent to price action, closing below the open and below the weekly midrange. Last week also violated the previous I.T. top of 22.42 established on the last day of July. A bearish weekly close following an I.T. top violation indicates intrinsic market weakness and the potential for an upcoming correction. Pay close attention to the current exit prices as we believe UNG should trade lower this week.

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