Commodities in general have been under pressure for the last couple years.
This can be seen by looking at the GCC Greenhaven Continuous Commodity ETF
which holds a basket of resources.
The weekly chart has formed a bullish bottom pattern, and as of last January
it looks as though it's now building a basing pattern. Overall commodities
are in the very early stages of a stage 1 basing pattern and it looks as though
it will be a few more months before any significant breakout will occur. But
there could be some early entry points if you know what to look for...
A few days ago I talked about how commodities tend to perform well near the
end of a bull market in the United States stock market. I also pointed out
which hot index was going to benefit from this.
Read Commodity Index Report: http://www.gold-eagle.com/article/gold-and-oi...ck-market-rally
In this article I want to bring your attention to the steel market. Using
the SLX Steel ETF you can clearly see the bottoming pattern and basing pattern
for this commodity.
Currently steel is underperforming the stock market and is vulnerable to lower
prices. But if we see a few things come together in the coming days or weeks,
this could be a screaming buy.
My technical take on steel is this:
SLX has formed a bottoming pattern from January - mid March. It has since
put in a strong impulse rally to make a higher high, and is now consolidating
above key support. The RSI (Relative Strength) remains in a down trend, but
if this starts to rise and SLX breaks above its recent highs around the $47.75
level I feel steel will start to rally with $50 being the next major whole
number and previous high for steel to find some resistance.
Also price has been riding along the 200 day moving average which is acting
as support. If price closes a couple of days below the 200 moving average I
would consider this to be a bearish sign.
Steel Trading Conclusion:
In short, we are looking for the relative strength to start making new highs.
Also we want to see a reversal bar on the SLX chart to the upside which we
got on Tuesday. Or you can wait for a breakout and close above $47-48 area.
Stop would be somewhere around the $45.75 area to start, then raise it as price
rallies using intraday pivot lows on the 30 minute chart.
Disclaimer: I do not own shares of TAN as this point,
but may buy some in the near future.
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