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Grains in Focus: JJG

|Includes:JJC, iPath DJ-UBS Grains Total Return Sub-Index ETN (JJG), MOO

Scott Pluschau is a Contributing Editor to the ETF Digest.

Scott was a financial advisor with Citi. His technical analysis report on the Nasdaq Composite Index was recently featured by Dr. Marc Faber in his June 1, 2011 Gloom, Boom & Doom report. Scott earned his degree in Accounting and Taxation from Pace University. He lives in Long Island with his wife Ilona, daughter Olivia and new baby Henry.

Let’s take another look at the weekly chart of the Grains ETF, symbol JJG.

In late 2009 through middle of 2010, JJG formed a triangle that resembled more of a bullish rising wedge pattern that I marked with blue trend lines now looking back at it again today. In my opinion, a falling wedge symbolizes diminishing supply until the bears have lost interest, as the falling prices are actually discouraging rather than attracting sellers. Buyers finally come in looking for bargains, and the trend reverses. Notice the upper trend line resistance has three points of contact. A break from a trend line with three points of contact is usually significant. I also marked where the breakout from the wedge was on strong volume, making this a dangerous place to be short and stubborn about it. Do not get stuck on the wrong side of a market going into vertical development on above average volume. With all due respect to other traders or analysts, I really don’t care how bearish the world’s most famous fundamental analyst in agriculture could have been about the prospects for grains at that time. My decisions are based on the chart and what the market is doing. On that breakout, I’m either going long, or I’m looking to get long on a throwback to the prior support and resistance level, or I’m doing nothing.

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Stocks: JJG, MOO, JJC