Pretty much everything but agricultural commodities has moved higher over the past two months. Stocks are up. Oil is up. Gold, Bitcoin, and high-yield bonds are all up. But the “ags” haven’t done anything.
That’s about to change.
Take a look at this chart of the Invesco DB Agriculture Fund (DBA)…
DBA bottomed in late April, right after we first turned bullish on agricultural commodities. And, for the past several weeks or so, the stock has simply chopped back and forth in a relatively tight trading range. This choppy action has provided enough time for all the various moving averages to decline towards the current price of the stock.
You can now see that all the moving averages are coiled together. This is the sort of action that builds up energy for a stock’s next big move.
DBA crossed above all of its moving averages last week. This sort of “bullish cross” often marks the start of a new rally phase.
Plus, the moving averages are now in a bullish configuration – with the red 9-day exponential moving average (EMA) above the 20-day EMA (green line), and the 20-day EMA above the 50-day MA (blue line). So, the odds favor the next big move will be to the upside.
Some slight weakness in the stock yesterday allowed DBA to drift lower and test the moving averages as support. If support holds, then DBA should start to rally again within the next few days.
DBA is a slow mover. Agriculture prices usually don’t change all that fast. But, this is a good-looking, low-risk setup. If DBA can pop above the April high of about $13.90, then we could see a quick rally up to the next resistance area just below $15.
Best regards and good trading,
Editor, Market Minute