Commodities Look Set to Rally Higher

By Chris Vermeulen

Commodities have and continue to be a fantastic trading vehicle for those who can stomach volatility. After last year's market crash most commodities pulled back to normal if not lower than normal trading ranges. This allowed us to enter the market at 10+ year lows for natural gas.

If we look at the weekly chart for gold, silver, oil, natural gas and the CRB commodity index we can see that commodities in general look ready to skyrocket higher approximately 34% on average in the next 4-12 months.

Take a looks at this chart of gold. While this chart shows the basic technical analysis of the price of gold you can see the completion of the Cup & Handle pattern which is VERY BULLISH. Also you can see gold broke to a new high. While I don’t like to trade new highs it's hard not to want to buy into this breakout. Most traders should be long gold already, but if you are not, you have a couple of options. Buy into this breakout with a tight stop or wait for a pullback and buy on a test of the breakout. Personally I am waiting for a pullback (test of breakout) before I add more to my position.

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Silver has been strong but has not held up its value as well as its big sister (gold). As you can see silver must break through two more major resistance levels before making a new multi year high. Overall silver still looks strong and I will be waiting for a low risk setup for us to add more to our positions.

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Crude Oil looks like a perfect Cup & Handle pattern and I am now looking for a low risk entry point which should form before we get a breakout it to the up side. I can see oil quickly moving to the $100 per barrel level once we get a breakout.

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Natural Gas had a perfect shakeout in August and many aggressive traders who follow these reports followed my lead and bought natural gas around $2.90 (10 year lows). This was the move I wrote about for nearly 3 months as we waited for it to unfold. Down side risk was around 15% so it was not my signature low risk setup but this rally has been exciting. Currently natural gas is trading at resistance and taking some money off the table is a great play here. You will never go broke taking profits.

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The CRB Index looks very similar to crude oil. Overall commodities look to be in the final stages of basing (bottoming) and from simple technical analysis the next more could be around 30-34%.

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Commodity Trading Conclusion:

Overall commodities look like a great buy. We are seeing precious metals moving up strongly and gold making a new high which is very exciting as our golden rock stock plays push higher and our commodity ETF play continue higher as well.

Energy is a mixed bag. Oil looks bullish and ready for a nice rally, while natural gas looks a little top heavy as it trades just under resistance.

We continue to stay in the market and are waiting for another round of low risk setups which could happen in the next few days if we get favorable price action. Remember to move your stops up to lock in gains. There is nothing worse than giving back a large portion of your profits when you don’t need to.

Disclosure: The author may have a position in one or more of the securities/trades mentioned above.

Original article

Comments

[Freya:]

you missed copper which will be very important next year in our own Infrastructure.

The CRB is still down more than 50% from its highs. There is a link to whats going on in India. Gold imports are way down if you only consider the Jewelry aspect but way Up if you include the Investment Angle. They are starting to Push Silver as well.

I was about to include the following somewhere for those in the Copper arena, but your Article was randomly selected as my point of entry into SA, so you get the Misfortune of getting it.

www.mineweb.com/minewe...

BTW You do a much Better job of presenting the Facts than most.

Oct 08 11:54 PM

[Freya:]

oops the India Link is in my Gold/Silver insta., I'll have to trail myself back to get it to you.

Oct 08 11:57 PM

[Mayascribe:]

There's a commodity land grab going on. Grab all you can, while you can. Almost makes no difference what you grab, just grab, grab, grab.

The global realization going on now is that there are only so many sources of commodities, so many stashes, to beget forward to the human population explosion; that is to say that 90% now want what the other 10% already have, and, if they don't yet know, they will so in the very next few years.

I'm grabbing all I can. Commodities are the next (ongoing right now) bubble. Bearish chatterhead peeps can say all they want about how nothing makes sense about the rise in the markets. Commodities, and that the dollar is getting trounced, makes it ever so easier to see the future as time passes by. Systematic collapse? Even more reason to own the future.

Grab now, before the eventual implosion I continuously read from so many here on SA. Just might be that this land grab, along with the increasing global middle class, might, just might, get us through a total collapse.

What an end run hedge that is! But, I can't rule it out, systematic collapse, because that nothing makes economic sense.

But to own what will be needed in the future does make sense.

Basically, there's a commodity short squeeze going on of unheard of proportions, ever in the history of humanity.

Oct 09 12:49 AM

[Freya:]

Here's the Link:

www.mineweb.com/minewe...

Oct 09 01:46 AM

[Moon Kil Woong:]

All commodities, in fact all assets are prepping for a bull run based upon an ever devaluating dollar. Which makes you wonder, how much of it is really due to positives in the commodity? As the author stated useful demand isn't really up for any of these commodities. It is being driven by investment, speculation, or rational expectations of further dollar debasement and potential inflation.

It makes you wonder, is the Federal Reserve really doing a good job preserving the value of the US dollar. It certainly seems like this mandate is some sort of 1984ish doublespeak or a cruel joke.

Oct 09 02:34 AM

[Freya:]

The Fed Reserve is a Congressional creation. The Treasury is Constitutional. The Mandate of the Treasury is to protect the Value of the USD.

I really don't understand why Anyone befieves that the Two roles the Fed has currently have anything at all to do with the Defense of the USD.

Bernanke wasn't sent to China to defend the USD, its not his Job.

Oct 09 03:44 AM