Commodities Weekly: Something You Oat to Know

From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

Pockets of strength continue to emerge within commodities.

This could be hard for some to believe when we see things like energy chopping beneath overhead supply.

Or the fact that precious metals persist in slumming it as some of the worst-performing assets on the planet.

But this is a diverse asset class with plenty of bright spots that suggest strength and support our thesis of a new commodities supercycle.

We’ve recently covered breakouts in Sugar and Feeder Cattle that are both still in play.

Even some of the laggards, like Silver and Lumber, recently defended critical areas of support.

This week, it was impossible to miss the chart of Oat futures. Let’s have a look!

Here’s a weekly chart of Oats: Big bases and new all-time highs... this is the kind of price action that gets us up in the morning!

Of course, we’ve heard the adage “gentlemen don’t trade oats.” 

Sure, it’s illiquid, and the maintenance margin is low.

But we’re at new all-time highs after breaking out of a 13-year base!

It doesn’t get much more bullish than that. To ignore it would be irresponsible of us as both analysts and investors.

We want to be long Oat futures -- if and only if --  we’re above the breakout level of 488 with an initial target of 682.

On the flip side, we can’t own Oats below 488, as risk is not in our favor. 

As for risk assets in general, how bad can things be if we continue to see areas of the commodities market break to new highs?

If we only review a handful of commodity charts, like Crude Oil, Copper, Gold, and Lumber, we get a very limited and distorted view of the commodity space.

We prefer to look at as many contracts as we can to grasp the entire picture. It means looking at charts of Coking Coal, New Zealand Milk futures, the Baltic Dry Index, and of course, Oats.

It’s a critical part of our process, and we love sharing it with you. 

We’ll be back next week. Same place, same time.

Until then, let us know what you think. 

Thanks for reading, and be sure to download this week’s Commodity Report below!