Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Lumber Lambasted

Commodities / Commodities Trading May 14, 2015 - 12:09 PM GMT

By: Austin_Galt

Commodities

Lumber has been punished lately with around 30% lopped off the price already this year. The bulls have walked the plank and exclaimed “Shivers me timbers!”

Alright, enough hijinx. Let’s analyse the technicals using the weekly, monthly and yearly charts.


LUMBER WEEKLY CHART

We can see the lambasting of price recently with it being virtually all downhill this year. However, the downtrend looks in need of a break and I suspect a bear rally is close at hand.

The PSAR indicator, which pertains to the dots, has had a bearish bias for quite some time now and is starting to look long in the tooth. Breaking these dots on the upside will likely confirm the bear rally is on.

The RSI shows a potential triple bullish divergence at this recent low of US$231.90 and that often leads to a significant rally.

The Momentum indicator looks like the move down is running out of puff and has put in a bullish divergence at the recent low.

So, if a bear rally is set to kick off, just how high can we expect price to trade?

I have drawn two horizontal lines denoting previous swing lows which set at US$276 and US$295 respectively. These levels may provide resistance but I think price can punch a bit higher and give these resistance levels a solid test.

I have added Fibonacci retracement levels of the move down and I am targeting the 50% level at US$305 to see in the high. Price turning down here or below would keep the downtrend in a strong position which is my expectation.

I have drawn a downtrend line and breaking above there would likely indicate the bear trend is over. Unlikely in my opinion and I doubt price will even go close.

Let’s move on to the monthly chart.

LUMBER MONTHLY CHART

The Bollinger Bands show price clinging to the lower band in bearish style. I expect any rally will find resistance at the middle band.

I have added a Fibonacci Fan which shows price is now down at the 76.4% angle. I favour some temporary support to come in at this angle. Perhaps a bear rally might see price bounce back up to the 61.8% angle but that should be the limit.

Once the bear rally is over, I favour a move down to final low which I expect to be around support from the 88.6% angle.

I have added Fibonacci retracement levels of the recent move up and price is now down at the 61.8% level which is a popular area for support so a rally would certainly be of no surprise to Fibonacci followers. However, I am targeting the 76.4% level at US$200 for the final pullback low to form and possibly a touch lower.

The RSI is showing a new low reading which is generally quite bearish. This indicator is quite oversold so a rally would unwind this bearish condition. Then perhaps price can make a new low which is accompanied by a higher RSI reading – a bullish divergence.

The MACD indicator has been trending down bearishly but the averages have diverged quite a lot and a rally now would be just the tonic to relieve this extreme condition and return the averages to normalcy.

Also, I have added the 200 period moving average which is denoted by the black line. Price has been oscillating around this average for years and is now in the bearish phase. Once the final pullback low is in place I expect a solid rally to ensue which sees price back above this average.

Let’s wrap it up by looking at the big picture yearly chart.

LUMBER YEARLY CHART

There is quite a bit of interesting information on this chart so let’s break it down.

The PSAR indicator has a bullish bias after price busted the dots on the upside in 2013. The dots are now underneath price and represent support. Price now looks to be coming back down to test this support which I expect to hold. The dots this year stand at US$157 and next year will be around US$165.

The Bollinger Bands show a massive consolidation to be in play with price bouncing up and down between the upper and lower bands with price now seemingly headed back down to the lower band. The lower band is currently just above US$150 and rising.

I have added Fibonacci retracement levels of the move up from 1971 low to 1993 top. The 2009 low was right at support from the 88.6% level and I now expect the next low to be around the 76.4% level which stands at US$185.

I have drawn a Fibonacci Fan which has shown some nice price symmetry. The 2009 low gave the 88.6% angle a good test while the recent high was at resistance from the 61.8% angle. I am now looking for price to come back to the 88.6% angle once again and bounce off it.

The RSI has a higher high in place and I expect the coming low to set up a higher low which would give confidence to a solid move higher in price after that.

Finally, in a bullish development, the Andrew’s Pitchfork shows price broke out of this bearish formation back in 2011. As often happens after this event, price comes back down but is held by the upper channel before turning back up. This is certainly my expectation here.

So, while things may appear quite bearish for lumber in the short to medium term, there are several bullish indications which augur for higher prices over the longer term.

By Austin Galt

www.thevoodooanalyst.com 

Austin Galt is The Voodoo Analyst. I have studied charts for over 20 years and am currently a private trader. Several years ago I worked as a licensed advisor with a well known Australian stock broker. While there was an abundance of fundamental analysts, there seemed to be a dearth of technical analysts. My aim here is to provide my view of technical analysis that is both intriguing and misunderstood by many. I like to refer to it as the black magic of stock market analysis.

Email - info@thevoodooanalyst.com 

My website is www.thevoodooanalyst.com 

© 2015 Copyright  The Voodoo Analyst - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Austin Galt Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in