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One Beaten-Down Sector Is Set for a Big Move Higher

By Jeff Clark
Thursday, July 11, 2013

 Agricultural commodity prices are bottoming.
 
It has been a rough year for sugar, wheat, corn, soybeans, and just about every other agricultural commodity. The PowerShares DB Agriculture Fund (DBA) – which is a basket of commodities – is down 9% so far in 2013. It's down more than 20% from its peak last September.
 
But we're now entering a seasonally strong period of the year for commodity prices. And it looks like agricultural commodity prices could be set to run higher...
 
 Take a look at the following chart of DBA...
 
 
In each of the past four years, DBA rallied from July into October. The strongest rally (29%) was when DBA bounced off extreme oversold conditions in 2010. The weakest rally (6%) happened when DBA was consolidating at a high level in 2011.
 
 The conditions today look more like those from 2010. So I expect the seasonal strength in DBA this year to be strong. Take a look at this shorter-term chart...
 
 
DBA is bouncing off its down-trending support line. And there's strong positive divergence on the MACD momentum indicator. So the chart is set up for a strong reversal higher as we enter this seasonally bullish period for commodity prices.
 
If DBA can break above the red resistance line at $25.35, it should quickly challenge the May high above $26. Beyond that level, it would hit resistance near $28 – where DBA started the year. That's a 12% gain from where DBA closed yesterday.
 
And compared to the rallies over the past four years, it's a reasonable expectation for this summer.
 
– Jeff Clark




Further Reading:

Learn more about the commodities trends you should be watching... and how to play them... right here:
 

In The Daily Crux
Market Notes
Oil prices break out to their highest level in over a year.

Japan's Nikkei is the best-performing major index so far in 2013… up 36%.

"Big Pharma" is going strong... pharmaceutical fund PJP jumps to a new all-time high.
 
"Big Cheap Tech" giant Cisco surges to a fresh multiyear high… shares are up 60% in the past two years, including dividends.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1652.62 +0.0% +23.2%
Oil (USO) 37.43 +1.8% +18.8%
Gold (GLD) 120.95 +0.3% -20.5%
Silver (SLV) 18.48 -0.5% -29.1%
U.S. Dollar 83.72 -1.1% +0.4%
Euro 1.30 +1.7% +6.1%
Volatility (^VIX) 14.21 -1.0% -24.1%
Gold Stocks (^HUI) 213.85 -0.1% -47.8%
10-Year Yield 2.68 +1.9% +78.7%

World ETFs
Symbol Price
Change
52-Wk
Israel (ISL) 14.69 -0.3% +28.3%
Japan (EWJ) 11.54 -0.4% +27.5%
USA (SPY) 165.19 +0.0% +25.9%
Taiwan (EWT) 13.49 +0.5% +14.2%
Singapore (EWS) 12.83 +0.5% +5.9%
India (IFN) 19.27 -0.7% +5.6%
Canada (EWC) 26.59 +0.1% +5.5%
China (FXI) 32.45 +0.3% +3.0%
Russia (TRF) 13.60 -0.8% +1.4%
S. Korea (EWY) 52.32 -0.3% -0.4%
S. Africa (EZA) 56.73 -1.7% -7.8%
Lat.America (ILF) 34.94 -1.4% -12.1%

Sector ETFs
Symbol Price
Change
52-Wk
Media (PBS) 21.91 -0.2% +52.0%
Construction (PKB) 19.43 -0.3% +43.0%
Defense (PPA) 25.73 +0.6% +40.9%
Financials (IYF) 73.55 -0.6% +37.5%
Alt. Energy (PBW) 5.61 +0.5% +35.6%
Biotech (PBE) 31.34 +1.7% +34.5%
Consumer Svcs (IYC) 106.53 +0.1% +33.6%
Health Care (IYH) 103.26 +0.7% +32.9%
Industrials (IYJ) 85.87 +0.0% +31.8%
Retail (PMR) 31.86 -0.2% +31.7%
Water (PHO) 22.91 +0.7% +27.7%
Transportation (IYT) 113.77 -0.8% +25.6%
Telecom (IYZ) 26.59 +0.9% +20.8%
Software (PSJ) 30.97 +0.6% +19.6%
Insurance (PIC) 19.01 +0.1% +18.3%
Big Tech (QQQQ) 73.51 +0.6% +17.6%
Semis (PSI) 16.10 -0.3% +16.5%
Basic Mat (IYM) 69.15 -0.3% +12.5%
Real Estate (IYR) 66.96 +0.0% +8.5%
Utilities (XLU) 37.91 +0.6% +7.4%
Nanotech (PXN) 6.94 +0.6% +5.1%

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