Take a hard look at the softs for opportunity

In the commodity world, “softs” are generally agricultural products. I brought you attention to these potential breakout plays a month or so ago on this video. If you took the time to watch that video, you may have profitably participated in some of the trades I noted at that time. If you do not watch my weekly video’s, might I suggest that you make a habit of doing so? I present ideas that are often NOT presented in this blog. You may be missing out on some great trading opportunities – so I might suggest you consider subscribing to the video’s in addition to this blog if you don’t already do so. Today, I’d like to take a deeper dive into some of the softs which are, in many cases, on the brink of some exciting technical breakouts.

I’ll present the charts of tradable ETF’s or ETN’s where possible. Note that Canadian investors should explore tax implications when trading such vehicles before diving in. Some of them require unique US reporting forms to be filled out. I will make my commentary quick and to the point to keep the flow going.

Wheat (WEAT)

Wheat is pausing after a sizable consolidation/ base formation. A breakout through $7.20 would be bullish.

Soy beans (SOYB)

Soy is consolidating between $22 support and $24.50 resistance after a strong move. A breakout through $24.50 would be bullish. A purchase near $22 may be appropriate for more aggressive traders.

Corn (CORN)

Corn looks a little like Soy (above). A pause after a big move. Support lies near $20, resistance near $23. A breakout through $23 would be bullish.

Coffee (JJOFF, JO, or MB)

On the JJOFF chart, coffee displays a big consolidation pattern with a lid near $23.50. Its relatively long consolidation suggests that if that lid is taken out, there is substantial upside potential.

Sugar (CANE)

Sugar has broken out. Its resistance (neckline) near $8 has been penetrated, suggesting technical targets to various former support zones near $9.50, $10.50, and if all goes well, as high as the mid-teens. As an aside – if you subscribe to the ValueTrend Update newsletter, I am planning on writing about a trade we recently did that took the sugar chart into consideration when we took profits on a consumer staple stock in the ValueTrend Equity Platform. If you don’t already subscribe to the newsletter – I’d encourage you to do so here.

Cotton (BAL)

After a strong rally, cotton is forming a perfect symmetrical triangle. A break of the triangle through $49 or so might imply significant upside potential.

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  • The S&P seem to finally (as of today Friday June 18) have broken the long term trend line from the start of the pandemic until now. Looks a bit ominous here.

    • Actually Dave the market remains in a bull trend so long as we remain above the 200 day SMA (a 3 day spike is forgivable). That’s at 3800 or thereabouts. Id expect a correction down to near that SMA. It will appear scary. Its not. Hold cash, wait for an opportunity. This is a normal correction that my Bear-o-meter called back on June 2nd. Its a healthy pullback so far. Id like to see more blood running in the streets before buying.

  • What do you think about UGA for the rest of the year? Does seasonality factor in or could gas prices continue upward? Thank you.

    • Natural gas and UGA are hitting resistance. May be tough to break that for a while

  • so based on your last reply to Dave you are saying dropping to 3800 should find resistance. That will be ~10% correction. Then if things work out as you anticipate it should run sideways or rise from there for some time as you believe we remain in a bull market.
    So shed some high beta now if we need cash and then if the technicals say so, buy back in at ~3800ish.
    From a fundamental stand point the economy is strong so it should be able to support continued growth in stock prices?
    Am I interpreting your response generally OK?

    • 3800 or so is support (not resistance)–could be that 4000 ends up being support given its last successful test. But yes, I think the summer will not be a raging bear–just a sideways period


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