The Two Trades
There are two trades in commodities markets that can’t be missed.
- Buying Commodities At All Time Lows
- Selling Commodities At All Time Highs
Buying Commodities At All Time Lows
Buying Gold when it was below $300 / oz was obviously a great investment long term, as was buying Lumber at $200 / board foot. Those are just a couple of the trades we recommend and will recommend in the future. Demand from globalization, China and India have us in a bull commodities market that should be here for years – if any one of the commodities markets makes its way near an all time low, we will be looking to buy.
Selling Commodities At All Time Highs
Selling Oil at $150 / barrel or Gold at $1,900 / Oz were obviously some of the best trades possible to make – those are the ones we are looking for. When a commodity market is at an all time high, the entire industry of producers/suppliers of that commodity, at some point, will not be able to help themselves and will lock in that price for a 10 year supply of their production. When 10 years of supply shows up in a commodities market, it almost always crushes it. We monitor all commodities at record highs and watch for tops to get short.
Technical & Formation Trading
Some of the most consistent trading can come from formations in the markets, particularly simple ones like Bull & Bear Flags in fast moving markets at all chart timeframes. Head & Shoulders, Rounded Bottoms, Falling Wedges & Trendines can also be sources of great short-term, medium-term and long-term trades – particularly when those formations are showing in markets that are already trading technically according to Elliot Wave and/or Fibonacci Numbers. Other types of consistent market technical analysis we use can include Elliot Wave & Fibonacci Retracements, among others. We also, of course, utilize Volume, Moving Averages, MACD & other indicators within our charting software, often to confirm or refute what we see with other technical analysis and to make sure we understand what is moving the market.
The fundamentals of a market are imperative to understanding who are the primary buyers and sellers in a market. Is it a lightly-traded, highly volatile market or a robust multi-trillion dollar market? What technology changes are affecting a market? What does the Commitment of Traders report say? Those answers are critical, and trade ideas are generated differently based on that information.
First we look at long term trends and fundamentals at work in markets, and craft an understanding of the long term picture and determine an expectation on the Monthly or Weekly chart. Then we look at the daily chart, and map out it’s movement and come up with our expectations for it. If there is a multi-day trade we like, then we dig into the Minute chart and look for an entry point that we can hope will get us in at a point with a tight stop-loss that gives us a chance at the larger market move we are expecting. By analyzing down to the minute charts we are able to come up with risk/reward scenarios that justify taking a position in the market at a specific time & price. This way we have short term goals and a chance at a much bigger win if our timing is right.