The increasing argument for buying commodities....

Commodities have been falling in price for ages, everyone hates them. Everyone loves the US market and its going up, albeit choppily. Trend traders have a saying: 'The trend is your friend, until the bend at the end'. When will the bend come at the end of the current rise of US stock prices? Nobody knows. The problem with a rising price, is that as it rises further, the asset becomes increasingly desirable, until suddenly it's seen as terrible value, the bubble bursts and the asset falls in price, where it starts its rise again, whilst the public mutter that no-one would ever buy that asset again, unless they were a fool. Think tulips, think house prices, think ASOS, etc. Meanwhile, the price of that asset starts to rise again, and so the cycle of greed and fear continues....

2015 03 17 CYN and SPY

I have been following the price of City Natural Resources High Yield Trust (CYN). This investment trust is a commodities play, holding a variety of commodities including oil and industrial metals.Interestingly, the % increase of it from 2010 into 2011 was the same as the % increase that the SPY (US top 500) has made from 2010 until now! Then look and see how much it has fallen away. It's amazing how much things can fall in price!  It made a move upwards a few months ago,and I opened a long position, only to get stopped out a few weeks later as the price dropped further. I am tempted to buy the stock itself and gradually accumulate this, without a stop loss, accepting that the price could fall further. Therefore no spread-betting or CFD trade here. This is not a trend-trade, it's counter-trend. It's the opposite of what this website is all about. In a few years time it could prove to have been a good value purchase! Here is a link to the website of CYN if you are interested in finding out more about it.

Back to trend trading: My new position this week is to go long Novae Group, an insurer.

2015 03 16 Novae Group

 

Why am I buying it?

  • the 30ma has is above the 50MA

  • it has made a new high

  • its rising from a pull-back

  • there are a series of higher highs and higher lows in place

  • It scores 96 on Stockopedia (esp high on value and momentum, perfect for a trend trader)


If you are interested in my views on the markets at the end of last week click here (3 mins).

If you would like to see how my open positions are doing, then click here (9 mins) . By the way, two of my positions closed last week, for a loss. One was not a trend-trade and taught me an expensive lesson, the other, well, it just went the wrong way, unfortunately. See the video and have a laugh at my expense!

Catch up with you next week!

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