Commodities Countdown

Battle Royale Sets Up For Commodities 2018-05-11

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  • Metals and Metal Miners surge
  • Oil Pops, oil stocks have a gusher week
  • Copper, Lithium, Rare Earth Metals, Steel all surge
  • Currencies struggle for trend direction
  • Marijuana stocks surge

It was a wild and woolly week in Commodityville!  Oil rocketed above $70 and the oil stocks price action went vertical. The humdrum sleeper Exxon shot 6.7% which is the biggest positive move on the chart.


Other majors like Shell broke out to new highs.

With the sudden surge in crude oil, the XLE and XOP charts are a long way above the 50-day moving average. History suggests some caution here as the uptrend might need a rest.

One way to show this cautionary level is the PPO. Calculating the difference between the price and the 10 weeks moving average using the PPO, we can see it rarely gets to this extreme. Almost all are met with a pullback, but not necessarily a final high. 

I also pointed out the large global miners broke out this week. BHP Billiton, Rio Tinto and Vale all broke out to new highs. This week's Don't Ignore This Chart article focused on BHP, so I'll post the RIO chart here.

We have a lot of initial indicators suggesting to jump on the move with industrial metals related trades. Canada and Australia both are pushing higher, faster than the USA. As well the group of RIO, BHP and VALE made new highs, TECK broke a down sloping trend line. This kind of symmetrical leadership usually suggest more to come.

This may follow into precious metals. Lots of the precious metals stocks moved big this week even though the move in gold and silver was small. Below is the Silver miners ETF. It had the second highest close since January and is building a very constructive base. A breakout here could be explosive.

The one thing about technical analysis is it tends to show points of real conflict. The SIL chart above is an excellent representation. Anyone buying this ETF over the last few months is somewhat optimistic as the price is probably higher than the purchase. However, any long term holders are still frustrated. If this chart breaks to the upside, there is a lot of buyers that would like to get out flat so the selling may hold the price down. If the worst happens and the chart quickly reverses downside, there will quickly be a whole new group of frustrated owners. 

Lastly, the Medical Marijuana ETF HMMJ.TO started to move above the 10 week moving average and is now making a trail of higher highs and higher lows. While the chart is still above it's 40 week moving average, the volatility is big. If you are looking for some fast movers, this area have big moves quickly both directions. I might suggest that while the price action is making higher highs and lows, an investing focus should be on the larger cap stocks in the group. This area is fraught with terrible stocks quickly losing investment capital. Only the strong shall survive might be a good motto. There were multiple 25% movers last week and this appears to be just getting its mojo back. Remember to position size small due to the high volatility.

This weeks video spends a considerable amount of time working through the bull case for commodities. Especially in the base metals. The currency changes are really important here as well. 

 

Good trading,
Greg Schnell, CMT, MFTA.

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Greg Schnell
About the author: , CMT, is a Senior Technical Analyst at StockCharts.com specializing in intermarket and commodities analysis. Based in Calgary, he is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is also the author of Stock Charts for Dummies (Wiley, 2018). Learn More
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