Commodities Corner: Last week's CFTC data demonstrated a record short interest in commodities, with money managers piling into short positions, as we head into the back end of January an inevitable squeeze of this crowded positioning appears to be developing with WTI crude the most crowded of the commodity sector bouncing over five percent from this weeks 13 year lows.
Lets take a look at the near term fundamental and technicals in our commodity trading instruments.
Gold: Long 1080, Stops To Entry, Target 1140
The yellow metal has remained supported this week as risk sentiment has remained jittery driven by growth concerns depressed crude prices culminating in safe haven flows. With net short positioning elevated, there has also been an element of a positioning squeeze.
From a technical and trading perspective I retain bullish gold exposure from the 10180 level with my stops moved to entry. I am now targeting an equidistant AB=CD objective at 1140 where the projected descending tredn line resistance also comes into play along with the 61.8% fib retracement of the prior decline.
Crude: Sidelines, waiting to sell a $33/34 test
Crude has registered fresh 13 year lows this week trading below $28 a barrel as money mangers interests reach record levels on the short side according to last week's CFTC data. As is often the case, especially as we head into month end, those who have chunky profits start to book some of those profits in to the close of the month and in crowded markets this often sparks a short covering rally.
From a technical and trading perspective, the chart structure remains bearishly orientated while we continue to register lower lows and lower highs the downtrend remains firmly intact as such we need to identify some potential near term trend invalidation points that would alert us to the potential of a broader phase of correction.
Against the current lows, I am anticipating a pullback prompted by a near term positioning shake out to test the 33/34 level in an equidistant corrective move equal to the first correction in this decline as highlighted in the chart above. I will monitor intraday reversal pattern at this level to enter shorts to play for trend continuation to test downside symmetry objective at the 25/26 level. My stop for this trade will be above the day high of entry risking 1%. If we don't get a reversal at the 33/34, then I anticipate a broader correction will be underway to challenge the $37 level next. I will issue a revised trade plan if this scenario plays out.