From the Desk of Ian Culley @IanCulley
Commodities are caught in correction mode.
Copper has undercut former support. Crude oil is trading below its former cycle peak. And grain markets can’t catch a bid.
It’s not the most bullish behavior. But remember, price doesn’t travel in a straight line.
On the bright side, most commodity contracts have stopped going down.
And the future will only become brighter for commodity and stock market bulls if buyers continue to bid up this next stock…
Check out Steel Dynamics $STLD, a $17B steel producer:
STLD has been on our radar for quite some time as it has respected key extension levels while grinding higher.
Notice the 98 level acted as resistance in early 2022. More recently, this level became support. This is the principle of polarity in action at a key extension level, making it an excellent place to define our risk.
I like owning STLD above 98, targeting 155 over longer time frames. But I want to place a protective stop just below the May pivot low of 90.55.
Let Steel Dynamics dance!
Bigger picture: Industrial names catching a bid as growth stocks digest their explosive gains speaks to a healthy rotation – the type of bull market behavior that supports sustained uptrends.
It’s also a constructive data point for procyclical commodities as Dr. Copper and crude oil search for solid ground.
Investors will likely find it increasingly difficult to hold a bearish bias for commodities or stocks if STLD is trending up and to the right.
Stay tuned!
COT Heatmap Highlights
- Commercials unwind their net-long corn position, dropping over 50,000 contracts over the trailing four weeks.
- Commercials hold within five percent of their largest long position for Chicago wheat in three years.
- And commercials carry a significant short position for feeder and live cattle, hitting three-year extremes for both.
Click here to download the All Star Charts COT Heatmap.
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