These two commodities look ready to rip

March 15, 20246 Comments

I posted a blog on March 7th outlining a strong sector rotation out of technology and into materials, energy, industrials and real estate. The stand out of the “new kids on the block” appears to be materials. I encourage you to read that blog to see the massive rotation into materials. As noted on the blog, this is a sector that Craig and I were buying over the winter. This, when all around were playing the MAG-7 FOMO trade.

Today’s blog focuses on copper and oil – two commodities within the materials sector who seem to be stealing the thunder from the likes of Nvidia stock. I recently covered another material that seems to be in play. That is, the gold & gold producers. Watch it to learn my views on how to approach gold’s breakout in a video here.

Copper

Copper looks to be forming a triangle–and possibly breaking out. Check the longer MACD uptrend, and support by the RSI momentum indicator. Neither are overbought, nor is MFI (moneyflow momentum).

Rule of thumb, guys. If a triangle breakout is confirmed, the target is measured as the height of the left (fat) part of the triangle from that breakout. The widest part of the triangle below is about $3.20 to $5. To keep it simple, if copper keeps going – we’re looking at $1.80 upside from the $4.00 breakout. That’s a $5.80 target, or 45% upside potential. If the metal only hits its old highs of $5, its still a 25% return from here.

Perhaps these upside potentials tell you why I like the materials sector.

Here’s the BMO metals ZEM ETF (disclosure: we hold a position in this ETF). This type of ETF gives us exposure to copper producers.

Crude oil

I’ve not only been talking about materials over the past few months, I’ve been bullish on energy as well. Here is an early February video on energy producers. This will be an update on crude oil.

The WTIC chart below illustrates a strong wall of resistance near $90. At current pricing near $81, there’s about 10% upside to that target. In crude’s favor are seasonality (until May) and rising, yet nowhere near overbought momentum and moneyflow momentum.

If crude breaks through $90, I’d think that $120 might be a reasonable objective. First things first – $90 neartermed target.

Below is the iShares XEG ETF.

Note the rising troughs but flat point of resistance that is currently being tested just under $18/share. Price & moneyflow momentum suggests that resistance has a decent potential for cracking.

I recommend that you watch my video on the energy trade noted above for greater details on the trade. The big challenge for Canadian producers is our radical Canadian Minister of Environment – who recently admitted that, although his policies are set to destroy our oil production , he actually doesn’t know much about the industry.

In my energy video, I showed a comparative relative strength line, illustrating how Canadian oil producer stocks were outperforming US producers, until Guilbeault was assigned the ministers position. For that reason, I suggest that investors consider US producers rather than sticking to domestic names. I also discuss gasoline and diesel charts to provide you with a greater depth of understanding of the sector.

Coming up

  • If you are a newsletter subscriber, you would have received our ValueTrend update on Thursday March 14th. In it, we cover our recent moves into materials and energy as noted above. We also discussed our view on the emerging markets. If you don’t subscribe to that newsletter or this blog, you can do so here.
  • I just finished a video outlining a unique and relatively unknown investment opportunity.  One that I feel offers neartermed upside in the wake of the MAG-7 boom (and subsequent overbought status). This is an angle on  technology that I am sure many of you have not considered for investment. And that’s why its still cheap to buy. You don’t want to miss this one! Click here to subscribe to the videos.

6 Comments

  • Hey Keith you said “Here’s the BMO metals ZEM ETF” (which is for Emerging Markets) in your copper section is that correct? or should this be “ZMT ETF” which is the BMO metals ETF?

    Reply
    • Yes caught that and fixed it. Brain was not connected to typing fingers on Friday, obviosly…

      Reply
  • On copper I think text should read $1.80 for a 5.80 target or did I miss something.

    Reply

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