The moves forecasted by the COT signals make them very adaptable to commodity based ETFs, writes And...
Agriculture ETF at Important Fibonacci Level
01/13/2010 12:01 am EST
Investors pushed the agribusiness ETF with the creative exchange symbol (NYSE: MOO) to new recovery highs, but has price moved too far too fast?
Let's look at a critical weekly overhead resistance level—the final level for bears to hang their cowboy hat on—that should give us a clue if the ETF price overheated or still has room to roam.
The main idea is that price has rallied strongly off the November 2008 price lows just under $20 per share and has recently challenged the $48 level in January 2009, more than doubling in over a year's time.
However, there is one fencepost that investors need to note going forward, and that's the long-term 61.8% Fibonacci retracement level at $48.12, which is mere pennies above Monday's high price of $47.90.
It's possible that we'll see a pullback or retracement from this level, but the trend has been so strong that buyers could just push right through the overhead level, which is the last major line of defense prior to the round number resistance at $50, which likely will pose little trouble to agricultural buyers should the market rally beyond $49.
The recent strength in agriculture has come largely due to the recent freeze that has burdened the eastern portion of the country, stretching from Florida to Maine and the Midwest's crop fields along the way.
We're here to take a technical purist’s look at price though, to assess trading opportunities and key levels to watch for clues to the future.
Any break above $49 and $50 is a signal that odds strongly favor continuation to higher prices, while the prevailing thought is that the 61.8% level could be a difficult level to overcome and could produce a slight retracement at best or a full trend reversal at worst.
On any pullback, watch the $43 level for initial weekly support (20-week EMA and 50% Fibonacci retracement) or the December 2009 swing high along with the 20-day EMA at the $45 level.
If this move truly is being driven higher by the recent cold spell, then look for a potential pullback to occur on any sign of good news that the country will be thawing out soon.
By Corey Rosenbloom of AfraidToTrade.com
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