An Exciting New Trading Opportunity

Jan 14, 2022

Brijesh Bhatia, Research analyst

In this video, I'll show you an exciting trading opportunity that is coming your way.

With the help of two charts, I'll explain how I have identified an upcoming profitable trade.

Please keep an open mind and take advantage of this opportunity.

Watch the video and share your thoughts in the comments section. I love to hear from you.

Hello viewers. Welcome to the Fast Profits Daily. Myself, Brijesh Bhatia.

In this video, I'll be discussing one asset class where you should keep a watch for a long term point of view. It's the commodity asset class.

Going LIVE Today at 5pm: The EV Gold Rush Special Event

I'll share the two widely tracked I would say the index, which is very, very much important for commodity investor or commodity trader. The first is the Thomson Reuters Commodity Index.

 

If you look at the chart over here, this is the Thomson Reuters Commodity Index and if I look at the weightage the index is formed with energy around 39%, agri around 41%, precious metals with around 7%, I and industrial metals somewhere around 13%.

So if you look at the chart over here, the previous which was between 1997 to 2003 it took 69 months to break out in 2003 and since 2003, to 2008, we saw a huge rally in the commodity space.

It was largely led by crude oil which went to the three-digit mark. But since then, since 2008, it continued to flow onto the negative side. It went on to the southwards journey and every time we have seen that lower high, lower low structure being built out since around July 2008, and since then, for the first time in 2021, precisely 69 months again, we witnessed they break out.

The breakdown which happened and the breakout which happened now in 2021, again it took around 69 months. If you look at 1997 to 2003, when the breakout happened, we saw a huge chunk of the rally. The momentum was very fast and furious. I'm not expecting that the momentum will be so fast and furious for next 3-4 years. But yes, the breakout is very, very strong and looking at the momentum, I would definitely look at the commodity space into my bucket. Once the money starts flowing over there, that could be an exciting opportunity.

 

My second chart over here is the S&P Goldman Sachs Commodity Index, which is known as S&PGSCI If you look at this chart, just looking at the weightage first, energy consists around 61-62%, led by the WTI sweet crude is somewhere around 25%, followed by brent crude, which is somewhere around 18%. Industrial metals which somewhere around 11%, followed by agri, which is around 16%, and the livestock, which is on 7.25%. Precious metals is not there in this S&P Goldman Sachs Commodity Index.

If you look at the structure over here, since 2008 when the fall started, it was foaming lower high, lower low structure like we saw in the Thomson Reuters Commodity Index and in 2021, for the first time, it broke the lower high lower low structure over here. This is very much exciting for me because they, two widely tracked commodity indices, both are breaking out of very, very crucial lower high, lower low structure and we might see the rally coming into the commodities space.

The only concern for me over here is the fund flow. If you look at the fund flow, it is basically moving into the equities. If you look at the US commodity ETFs, we haven't seen the fund flow going into the ETFs of the commodity space, be it oil, bullion, silver, industrial metals.

So I think I'll wait for a trigger over there. When the fund flow starts in to these ETFs, we should definitely look for this space over here. If you are an equity trader or investor you should definitely look for the agri and energy space because if you look at the Thomson Reuters Commodity Agri Index, it's somewhere around 41%. If you look at S&P Goldman Sachs Index, agri is somewhere around 16-17%.

So I think funds might flow into the agri space as well and the agri companies, which are directly benefiting from the rising commodity prices, could be beneficial over there. So can focus on those stocks as well into the equity space. But definitely when should look at this asset class from next 2 to 4 years horizon and just track it. If the fund flow starts moving into the commodity space, we might the triggering of a good bullish rally in the coming weeks.

So before I sign off, in case you think these videos are helping you, do comment about your views into the comments space and do not forget to click on the like button.

Signing off, Brijesh Bhatia.

Warm regards,

Brijesh Bhatia
Brijesh Bhatia
Research Analyst, Fast Profit Report
Equitymaster Agora Research Private Limited (Research Analyst)

Recent Articles

Bull Market in Silver is Still on May 20, 2022
This is why I think the silver bull market will continue.
Why the RBI Must Raise Interest Rates May 19, 2022
In this video I'll explain why India needs higher interest rates.
Fear is an Opportunity on D-street May 19, 2022
Is a bottom in place on the Nifty? Find out...
Should You Buy Asian Paints with Crude Oil @ US$100 May 17, 2022
Is Asian Paints a buy? Find out...

Equitymaster requests your view! Post a comment on "An Exciting New Trading Opportunity". Click here!