Commodities – particularly gold and oil – are looking technically attractive. Today I’d like to visit a few of these plays from an intermediate (weekly) and longer termed (daily) perspective on the charts. Let get at it:
A mere 5 weeks ago, gold was trading 25% lower in price. The breakout through the downtrend, as seen on the weekly chart above – and noted on this blog a few weeks ago- was significant for intermediate termed investors. Its looking like gold has finished a Phase 1 base, and broken out. However, there are some signs of a weakening from an overbought condition on the daily chart. Stochastics, MACD and RSI are flattening after reaching overbought areas. Comparative strength to the US stock market is flattening. Moneyflow- as seen on the extreme bottom and extreme top panes, is waning. A pullback is in the works, and this pullback should provide an entry point shortly. I’ll hazard a guess at a target of just under $1200, which was the last point of resistance when the chart was down trending. Keep your eyes open for an opportunity on gold.
WTI Oil’s weekly chart shows us that there is a mighty convergence of resistance about to come into play around $38-$42. I draw this conclusion by noting that the downtrend line (which has not been broken- an important thing to consider…), along with the 200 day MA (40 week) and the last peak within the current downtrend all lie between those price points. The short termed chart below shows us that momentum (Stochastics, MACD, RSI) is largely overbought, but moneyflow is bullish. Thus, my opinion is that we may just see oil crack that $42 resistance point – but not likely right away. Expect a pullback before the trendline is tested.
Steel is a sector that I haven’t covered before. It’s a product of base commodities, and its presenting an interesting technical profile. The weekly chart shows a successful break of the 40 week/ 200 day MA. However, SLX (steel producers ETF) is just testing the last peak within its still-present downtrend. Breaking this resistance point above $24 on the ETF suggests a break of the downtrend as well – meaning that all of my conditions are met for a “Phase 1” breakout (please read my book Sideways for more on this). I didn’t post the short termed chart on steel, given its need to break $24 before I become interested in the play. Keep an eye on this one.
Somebody asked me to post my thoughts on the TSX. The TSX is tied into energy, metals and financials. Really, the financials have been largely lead by energy lately, so I tend to pay more attention to energy when viewing the TSX. While I didn’t post the charts for copper and iron ore, etc., these too have influence on the Canadian market. As you will note on the weekly TSX300 chart below, this index has strong resistance between 13,300 (current levels) and 14,000. This resistance coincides with the current zone of resistance on oil. Thus, my conclusion remains the same for the TSX as it has been for a while – that is, as oil goes, so too does the TSX. Watch for oil’s break before buying a broad index TSX ETF.
Keith on BNN: Tomorrow, March 10 at 6:00PM
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