Commodity ETF Trading Ideas for the Week Ahead

03/22/2010 10:26 am EST

Focus: ETFS

Last week was nothing special as stock market continued to drift higher on light volume and the Volatility Index (VIX) reaching a new multi-year low. This mix of higher prices on light volume, multi-year lows in the VIX, and an overbought market paints a clear picture to a market technician: Be ready for a pullback!

Last Wednesday, I sent out a report covering sector rotation comparing the price performance of these sectors from the January peak with last weeks price action. It was very interesting and it pointed to a sharp selloff on Thursday or Friday.

GLD Gold ETF Daily and 60-Minute Chart

Last week, gold gapped higher and then traded sideways for a few days. I will admit it was very tempting to buy into the move, but I stuck with my trading strategy, which is to not chase moves which gap in my direction.

Gaps are known to get filled about 70% of the time. What that means in this situation is that the price will most likely sell back down to fill that gap before trying to move higher.

All that said, the problem I see now on the daily chart is the possibility of the mini head-and-shoulders pattern breaking down. If gold moves any lower, then I would expect a sharp pullback. The measured move would equal a pullback to the $104 area on the GLD chart and the $1070 level for spot gold.


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SLV Silver ETF Trading Chart

The silver chart looks much different than gold’s, but in reality, they are trading in a similar situation. If silver moves any lower, then sellers will flood the market and take the price down to the next support level. But if we get a bounce, then it should surge and rally almost a $1 per ounce from this point.

Only time will tell as we let this trade unfold with a stop at $16.52.


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Natural Gas: Weekly Trading Chart

Natural gas has been selling down for almost two months. The chart is starting to show a possible buy point if all goes well in the next few weeks.

What I like about this chart is that we saw a break of a support level and heavy selling, which tells me the general herd is getting shaken of their long positions. This extended selloff is now entering a support zone and could provide us with a low-risk setup in the next two to three weeks.


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Crude Oil: Weekly Trading Chart

Oil is trading similar to gold and silver. It is trading at a key pivot point and could go either way quickly. I will be keeping my eye on the daily and 60-minute charts for a possible low-risk entry point.


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Weekend Stock and Commodity Trading Conclusion

In short, the overall market is trading at level were there is not much to we can do. Daytraders are able to take advantage of this price action, but not swing traders.

I feel the major indexes have another one to two down days left in them before a bounce, but it’s more difficult to gauge the momentum with a cool-down period (the weekend) in the middle of it all.

The market is on the edge of some exciting moves, and I can feel something brewing. With any luck, there could be some great opportunities in the coming days.

By Chris Vermeulen of GoldAndOilGuy.com

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