THREE IMPORTANT CHARTS
Aksel Kibar
8 August 2009
RJ/CRB INDEX
Created in MetaStock from Equis International
The history of the Reuters/Jefferies CRB Index dates back to 1957, when the Commodity Research Bureau constructed an index comprised of 28 commodities that made its inaugural appearance in the 1958 CRB Commodity Year Book. Since then, as commodity markets have evolved, the index has undergone periodic updates to remain a leading benchmark for the performance of commodities as an asset class. The index was renamed the Reuters/ Jefferies CRB Index in 2005 when it underwent its tenth and most recent revision.
The chart above analyzes the RJ/CRB Index for the past two years. TECH TALK analyzed the commodities and the CRB Index in the previous issues. After the breakout in May, the RJ/CRB Index rallied towards 263 levels and tested the first resistance in the beginning of June. The correction during June-July period pulled the index back to 230 levels. The RJ/CRB tested its trend line support at 230 and rebounded sharply towards its resistance at 263 levels. Now the index is testing the previous high at 263. Short/intermediate term uptrend remains intact. The commodities continue to gain strength. A break above the resistance at 263 will push the index towards its second target around 300 levels.
GOLD ($/OUNCE)
Created in MetaStock from Equis International
Aug 7 (Bloomberg) Europe Central Bank Agree to Third Cap on Gold Sales. European Central Bank agreed to a third five-year cap on gold sales and said planned disposals by the International Monetary Fund could be done within the accord. The European Central Bank and 18 other banks agreed to sell no more than a combined 400 metric tons of the metal a year through September 2014. That's less than the annual cap of 500 tons in the current agreement which expires Sept. 26. Four hundred tons, or 12.86 million troy ounces, is equal to about a sixth of annual mine production. At this year's average spot price of $920 an ounce, 400 tons would be worth about $11.8 billion.
The chart above shows the Gold bullion price for the past 4 years. TECH TALK analyzed the Gold price in the previous issues. As we had more data on the chart, the message became clear. In this issue TECH TALK analyzes the simillarity between the two consolidation periods. In the beginning of 2006, Gold reached $730 after a strong rally. In the next 16 months the price consolidated in a range. The swings were wide at the beginning but become less volatile at the end. The consolidation period turned into a symmetrical triangle. The upper boundary was at $685 and the lower boundary was at $642. The price was holding above its 200 day moving average. The difference between the consolidation range ($685-$642) and the previous high ($730) was 6.5%. After 16 months of consolidation the price broke out on the upside and reached $1,035 in only 6 months. After the strong uptrend, Gold entered into another consolidation period. In the first half of 2008, the swings were wide but at the latter stages of 2008 and in 2009 the volatility decreased. Since the beginning of 2009, the price formed a symmetrical triangle. The upper boundary is at $980 and the lower boundary is at $930. The price is holding above its 200 day moving average. The difference between the consolidation range ($980-$930) and the previous high ($1,035) is 5.6%. In a few months Gold is going to move out of the consolidation period in one direction. The direction of the breakout will confirm the next trending period in Gold. Important resistance is at $980 and the support is at $930.
NATURAL GAS
Created in MetaStock from Equis International
Natural Gas is an important fuel source, a major feedstock for fertilizers, and a potent greenhouse gas. It is often informally referred to as simply gas. The world's largest proven gas reserves are located in Russia. Russia is also the world's largest natural gas producer, through the Gazprom Company. Major proven resources (in billion cubic meters) are Russia (47,570), Iran (26,370), Qatar (25,790), Saudi Arabia (6,568) and United Arab Emirates (5,823). The world's largest gas field is Qatar's offshore North Field, estimated to have 25 trillion cubic meters of gas in place enough to last more than 200 years at optimum production levels.
The chart above analyzes the Natural Gas price for the past 4 years. The historical price action has been very volatile on the Natural Gas. In the last ten years the energy price had long base formations followed by sharp rallies ending with sudden price collapses. The analyzed 4 year period is an example of those price actions. In the beginning of 2006, Natural Gas reached its historical high level at 15.78. The price reversed sharply and tested 4.00 levels in 9 months. In the beginning of 2008, the long consolidation period was broken on the upside at 8.63-9.00 range. The breakout was followed by a sharp rally and the price reached 13.70 in only 5 months. The reversal was sharp and sudden. Natural Gas broke down its trend line support at 12 levels in the second half of 2008 and fell down to 3.2 levels in the following year.
Since the first quarter of 2009, the price is forming a base and possibly getting ready for another trending period. If the base formation is successful we could expect higher prices in the following months. The important resistance is between 4.40 and 4.60. A break above this range will signal a reversal in the trend. The technicians might be viewing this base formation as a possible double bottom. The confirmation will come only after we see a breakout above the strong short/intermediate term resistance. Strong support is at 3.20 levels.
Aksel Kibar, CMT
Portfolio Manager
Abu Dhabi Investment Company PJSC
www.investad.ae/en/Home.aspx
Disclaimer: Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. Any and all ideas, opinions, forecasts, market analysis or market data, expressed or implied herein, are for informational purposes only and should not be construed as trading recommendations to invest, trade, buy or sell securities and or speculate in any specific futures contract, option or any other market. Any investments, trades, and or speculations made in light of the ideas, opinions, and or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The market data contained herein is believed to be reliable, but has not been independently verified. Accordingly, such data cannot be guaranteed as to reliability, accuracy, or completeness, and as such is subject to change without notice. In no event will ADIC or any of its employees be liable for any information contained herein. Data Source: Reuters, Investopedia.
Email this Article to a Friend 
Printer Friendly Version
