Three Commodity ETFs That Have Recently Bounced off Support

12/08/2010 12:01 am EST

Focus: ETFS

Cotton, corn, and coffee were the hottest commodity markets prior to the November 9 peak. Following a moderate consolidation, they all appear to be rebounding. Investors who bought their respective ETFs at their original breakout prices earned superior returns.

An opportunity for a repeat performance looks like it is underway. Here are three commodity market ETF symbols to watch:

  1. iPath Dow Jones-AIG Cotton Return Sub-Index ETN (BAL)
  2. Teucrium Commodity Trust Corn Fund (CORN)
  3. iPath Dow Jones-UBS Coffee Sub-Index ETN (JO)

Cotton, as represented by BAL, is showing the strongest rebound from its 50-day moving average. That price ($58) is a technically defined secondary entry point.

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The ETF represented by CORN has also recently bounced, although with less gusto, and it has recently come down to test the 50-day moving average:

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Coffee (fund symbol JO) is not rebounding as strongly, but it also did not decline as deeply as other commodity markets. From that indicator’s perspective, it is in better condition and should be the first one to reestablish new highs. It continues to hover above its 50-day moving average, which is just above $53.

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The point of isolating one or more of these particular ETFs for a trade is related to the precedence of outperformance. The strongest markets tend to continue as the strongest following their first significant consolidation and correction. Cotton has been the strongest of the three, and the recent pullback was its first to the 50-day moving average. The implication is that cotton ETF BAL may be the top choice going forward.

By Paul Thornton of Investor Boot Camp Online

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