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ETF in Focus: JJG

May 10, 2011 9:28 AM ETJJGTF, DBA, DBC
David Fry profile picture
David Fry's Blog
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Portfolio Strategy, ETF investing

Seeking Alpha Analyst Since 2005

David Fry writes a subscription newsletter focused on technical analysis of exchange-traded funds, called ETF Digest (www.etfdigest.com). Dave founded the ETF Digest in 2001 and was among the very first to see the need for a publication that provided individual investors with information and actionable advice on global ETF investing. We particularly like the overview of financial markets that his work provides. Even if you're not a fan of chart analysis, Dave provides insight and commentary into which global markets are "working" and why. Specializing as a market strategist and tactician, Fry focuses on evaluating, creating and implementing a variety of ETF portfolios for individual investors and financial professionals. His philosophy and approach incorporates fundamental with technical analysis in pursuit of risk management and capital preservation especially during uncertain and volatile times. His new eBook, The Best ETFs: U.S. Equities,is now available on Amazon Kindle. Written as a cheat sheet to only the best ETFs for you or your client’s portfolios. For those that don't have a Kindle, you can purchase the pdf here: The Best ETFs: US Equities [https://gumroad.com/l/The%20Best%20ETFs]
Commodities are a hot topic lately.  Let’s take a look at the exchange traded fund symbol JJG, the iPath DJ-AIG Grains, on a weekly chart. For most of 2009 and into 2010, JJG formed a triangle pattern with three points of contact on each support and resistance trend line which I have drawn on the chart. When JJG had a breakdown of the triangle it was no doubt a bearish signal, but failed signals are also the strongest.  In the classic “bear trap”, the short sellers believe the market well decline, and as the market reverses the short sellers are trapped and have to buy back at rising prices helping to fuel a rally. The only thing wrong with being wrong on any trade is staying wrong. The grains soon rallied across the triangle with enough momentum to breakout to the upside on confirming volume.  Quickly exiting your trade when there was no follow through price action to the downside keeps you in the game for opportunities like this very next breakout. From an auction market perspective JJG entered a phase of vertical development on that breakout of the triangle, where the market was clearly seeking new value at higher levels. In other words demand is overwhelming supply, and until the supply meets the demand, it pays to sit back and do nothing but look to add to your position. These two trades are the epitome of cutting your losses short and letting your winners ride...READ MORE

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