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...

Rally No One Believes Enters 11th Month

The rally no one has really believed in all along since March 2009 has now entered the 11th month, and it is showing the sign of further upside. I said here, here, and here on this blog that the rally might last longer than most people were expecting, and it did.

I've been long pretty much all the way, though I've been shaken out here and there (I'm a chicken little). The only reason I would be selling some of the positions would be to raise money to buy stocks that would likely to move faster than what I have.

There are so many technical breakouts on individual stocks almost every day since late December that it is impossible to be in them all. My most recent purchase was today, call options on North American Palladium (PAL). JASO went lower than what I would have liked, but bounced right back, making 50% gain on my options. CENX that I bought almost on a whim on the breakout continues to go higher. All I do on this stock is to keep raising my stop limit every day. I've heard about a new industrial metal ETF, which should be good for both CENX and PAL, and probably MTL. UCO is up further since I sold my call options. I switched to more liquid options on USO, out of money April calls (strike at USO $50; currently USO is about $40) just as a crisis hedge (Middle East is volatile). Even those are making money.

I don't have enough funds to play, but just from TA, financials seems to be ready to break out. Individual names in financials have already started to break out. Among too-big-to-fail banks, I like Morgan Stanley (MS) setup.

Since I cannot be in all and I don't have enough funds, I might as well throw out some names that I've been watching. Many of them have already broken out to the upside, but you could wait for backtesting. Just for your entertainment, and none of them is recommendation. Please do your own due diligence.

JLL
MS
GBG
IVN
AFFX
SQM (just about to break the resistance at $40)
BLL (right at $51-52 resistance)
TUP (resistance $50)
URE
Canadian oil/gas trusts (I have PVX that I've had for long time for dividend, it spiked 6% today)

Good luck and good trade. For now, buying the breakout has been working, which I tend to take it as a sign of a bull market in stocks. Many people these days say that strategy is outdated, that it doesn't work when the market is this manipulated (whether by the Fed or Vampire Squid). I'm just saying it's been working, particularly these past 3 weeks or so. But remember, the stock market IS NOT the economy.

PAL: First One of the Year That Got Away

Actually it got away in front of my eyes (or I should say while I blinked) on December 30, 2009.

North American Palladium Ltd. (PAL) is a volatile small-cap stock that has been basing in the range since August 2009. The bottom trend line around $2.50, the top line at $3.30. On December 30, the last I saw the stock on my watch list was it was negative for the day. Then it reversed, took out the resistance at $3.30 while I was looking elsewhere. (I was looking at UCO to figure out the timing to sell my call options on it. UCO, by the way, did bounce where I thought it should bounce. :o)

Note to self: Is there a thing like "buy stop"?

The chart is 9-month daily chart of PAL. Since the last 3 trading days have left gaps, they may be filled (or so I hope). For now, all I can do is to watch and how it behaves - whether it breaks down right away like it has done before, whether it comes back to the breakout point ($3.30), or whether it keeps going.


Palladium (metal itself) has been acting very strong. In fact, palladium price broke out of a base at the same time PAL broke out, on December 30. With industrial demand (palladium's uses overlaps those of platinum) picking up and a new ETF (platinum and palladium) coming up, maybe this stock still has a plenty of upside.