From the Desk of Ian Culley @IanCulley
So long, 2022. It’s been real.
With only a few trading hours left in the year, I’m ready to turn the page. I’m sure plenty of you can relate.
In the spirit of looking ahead to a bright and beautiful 2023, I want to share seven of my favorite commodity charts for January.
No grand thesis, just seven potential setups that have my attention heading into the new year.
Sugar futures print a potential failed breakout after coiling within a tight range since the summer of 2021: The lack of upside follow-through accompanied by a bearish momentum divergence warrants caution.
We have no business trading sugar from the long side if it chops within its prior range.
But I want to keep a close eye on this one.
Momentum divergences have a way of working themselves out on daily time frames, as I give far more credence to divergences based on 14-week RSI readings.
And breakouts above year-long resistance often result in sloppy price action.
If and when the bulls push price back above 20.70, I like buying strength with an initial target of 22.75 and a secondary objective of 26.
Beans are breaking out to fresh six-month highs despite news of a monster crop coming out of Brazil: Regardless, I like trading the March soybeans contract from the long side if it holds above 1505’0 with a target of 1638.
Meanwhile, bulls need to post an overbought momentum reading, confirming the breakout and supporting the next leg higher.
3. Soybean Meal
March soybean meal broke out of a basing formation last month.
It’s always bullish to see derivatives lead a rally.
Soybean oil led during the 2020-21 bull run, and it appears bean meal is at the head of the pack this season: After finding support at a key extension level, bean meal is resolved higher from a bull flag on Friday.
I like buying this breakout above 466.50 with an initial target of 491.50.
Also, notice momentum remained within a bullish regime during the basing process, and an overbought reading followed the base breakout.
These data points add to my bullish conviction, making soybean meal futures my preferred vehicle in the bean complex.
I chose Kansas City wheat because the continuation chart has respected key Fibonacci levels during the past 36 months: This is a particularly clean chart. But I like the entire wheat complex, including Chicago and Minneapolis spring wheat.
All three contracts currently carve out potential bottoms below their respective October pivot highss.
For KC wheat, the level stands at approximately 1010’0. If and when it breaks above that level, my bias is higher toward 1265’0.
It could run much higher, of course, as grain markets tend to produce explosive rallies.
Expect more analysis and trade ideas on wheat futures in the coming weeks and months.
As long as silver trades above those former highs, I’m making the bet it’s reverting well beyond its mean.
First, it needs to take out its 2020 highs at approximately 30.
If ever there was a failed breakdown to get behind, this is it. It was a valiant effort, but sellers couldn’t take control of gold below 1,678.
And now buyers have stepped in, driving prices higher: The former all-time high at 2,089 represents the next major obstacle. Once gold clears that hurdle, it’s off to the races.
You can manage your risk against 1,678 until then.
Platinum futures joined the pack by printing fresh nine-month highs on Friday: These new highs support the bull case for precious metals, which indicates broadening participation and healthy risk appetite.
Call it another feather in the goldbugs’ hats, as price continues to suggest a burgeoning bull run for precious metals.
I like platinum long above its former 2020 highs at approximately 1,050, targeting 1,350 in the coming 2-4 months.
That’s it for today.
Happy New Year!
COT Heatmap Highlights
- Commercial hedgers continue to unwind their long position in gold, dropping more than 40,000 contracts this month.
- Commercials’ long exposure to lumber approaches three-year extremes.
- And commercial hedgers add to their long position in the Canadian dollar, coming within eight percent of a three-year extreme.
Thanks for reading! As always, please let us know what you think.
And be sure to download this week’s Commodity Report below!
Premium Members can log in to access our Weekly Commodities Report and Trade of the Week. Please login or start your risk-free 30-day trial today.Lost Password?