Monday, April 5, 2010

Commodities Breaking Out of Range

That's despite the continued strength in US dollar.

This is a 1-year daily chart of crude oil. It has been in the ascending channel since June 2009, and I've been playing the horizontal range from October 2009 until now. Today it broke above the horizontal upper resistance, though still within the ascending channel.

The upper channel resistance will be somewhere near $97.5. I personally think crude oil is headed above $100 again.

When I sold my last UCO (double long crude ETF) call options when UCO hit $13.20, I flirted with the idea of buying puts on the pullback that I thought might happen. I didn't buy, for I had a feeling that the range would be broken someday soon to the direction of the prevailing trend, which was up. I was hesitant to buy another set of calls, so I lost on that. UCO ended today at $14.20, and I'm sitting with the gain of 18% on the ETF.

I'm at a loss right now what to do with crude oil. My comfort range may be gone. I'll wait and see if it comes down to test the breakout point ($84). If that holds, I do want to add to my holdings of UCO, either the ETF itself or call options.

Here's another commodity that's about to break out of nearly 2 years of consolidation. Do I see a huge cup and handle formation? If it is a cup and handle formation, the target price will be the depth of the cup added to the handle high breakout point: $788.

My play on palladium has been PAL (call options), which has gone absolutely nowhere because I bought them at a wrong time (when it was surging in the beginning of this year). But now it seems to be breaking out of the symmetrical triangle on a huge volume. I may be in the money by the option expiration (June), just like I lucked out on PCX calls...

1 comment: