Read Larry Connors' blog – Short Term Trading Strategies
Oil is hitting all time highs day after day, soybeans are surging, and corn's uptrend is picture perfect. Is there a way an active stock trader can participate in these moves? Trading physical commodity futures directly is one choice. However, one would need to set up a separate commodity futures account, in most cases. In addition there are risks involved that go beyond simply losses in your account; one can actually end up owing the broker money and or get stuck limit up or limit down in a locked position- unable to exit.
A solution to the inherent problems in trading commodities directly is to use the IPATH Dow Jones AIG Commodity Index ETN ticker symbol DJP. DJP is traded on the NYSE via Arca and represents 19 diverse physical commodity futures unleveraged; plus the rate of interest that could be earned on cash collateral placed in specific Treasury Bills.
DJP provides access to the physical futures markets, yet has broad diversification; thus greatly limiting risk of single commodity stocks. Each commodity group, inside the index, is rebalanced annually and exposure to any single group is capped. The weightings of the index are 35% energy, 28% agriculture, 21% industrial metals, 10% precious metals, and 7% livestock.
DJP has been in a nice uptrend on the weekly chart since early 2007. It experienced a relatively dramatic correction in March 2008 and now appears to have resumed the uptrend. However, commodity bears will point out, a double top may be forming on the weekly chart portending to a prolonged retracement. My opinion would be to wait until 68.03 is taken out prior to going long. On the bearish side, I would wait until 59.97 to short.
Dave Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.
About TradingMarkets | Contact | Advertise | Careers | Link to Us | Site Map | Help | Terms & Conditions | Privacy Policy | Return Policy | Testimonials | Feedback
The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
The Connors Group, Inc.
10 Exchange Place, Suite 1800
Jersey City, NJ 07302
© Copyright 2009 The Connors Group, Inc.
