Breaking News
LAST CHANCE for Cyber Monday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

What’s Your Trade Ahead of the Fed? Wooden Opportunity?

By Sunshine Profits (Rafael Zorabedian)Stock MarketsJun 16, 2021 07:14AM ET
What’s Your Trade Ahead of the Fed? Wooden Opportunity?
By Sunshine Profits (Rafael Zorabedian)   |  Jun 16, 2021 07:14AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

US equity markets sold off a bit in Tuesday’s session ahead of today’s FOMC statement. What is your plan?

Major US equity indices traded lower ahead of the Fed meeting, and the debate over growth versus value stocks continues. Is there any magic language or policy stance that can come out of today’s Fed meeting to provide clarity in this market?

PPI data came out stronger than expected yesterday. This data adds more fuel to the inflationary theme, while Retail Sales were weak. The markets should have been lower from this data, and they were, albeit slightly.

As the anticipation builds to today’s FOMC statement at 2:00 PM ET today and the subsequent press conference at 2:30 PM ET, it seems like a good time to revisit a market that we are following - lumber.

If you have been following along and read the June 9 publication, you know that we are eyeballing the lumber markets for an ETF trade possibility. While the lumber market has been just insane to the upside in 2021, it has recently pulled back substantially. The question remains: are these higher lumber prices sustainable? If so, is there a way to participate via an ETF?

While this may seem like an obscure sector or at least an underappreciated one, let’s take a look at the front-month lumber futures to get caught up on the most recent price action.

LB.F Chart
LB.F Chart

Figure 1 - Random Length Lumber Futures Continuous Contract February 21, 2020 - June 15, 2021 Daily Source

Front-month lumber futures made a pandemic low of 251.50 on April 1, 2020. Its recent and all-time high is 1733.30, which was put in on May 10, 2021. Taking a 50% retracement of this move, we have a value of 992.40. Yesterday’s low in front-month lumber futures was 943.70 and a close of 1009.90. Yesterday’s trading was also on higher than average volume. It is important to note that it traded below the psychologically important level of 1000, through the 50% Fibonacci retracement, and then reversed intraday and closed higher. This kind of price action really gets me going.

Let’s also illustrate this price action described above via weekly candlesticks:

Lumber Futures Weekly Chart
Lumber Futures Weekly Chart

Figure 2 - LBS1! Random Length Lumber Futures Continuous Contract September 2019 - June 2021 Weekly Candles Source

Isn’t that something? I wanted to illustrate this via the weekly candlesticks to add a little more clarity. The weekly candlestick that is being formed this week could be a sign of things to come. Now before we go any further:

I strongly suggest against trading in Lumber Futures. They can be illiquid, and experience many limit up and limit down days. You could be stuck in a losing position and not be able to get out. The only traders in Lumber futures should be hedgers that are in the wood business or deep pocket institutional traders that have real money to burn. Futures trading entails unlimited risk. I am sure that many fortunes have been made, and many more have been lost during this insane lumber market. Being on the wrong side of a futures market like Lumber can be brutal.

Lumber is a very thin contract and may only trade a few hundred contracts per day. But with such intriguing technicals, I want to circle back to an ETF that we covered in the June 9 publication: iShares Global Timber & Forestry ETF (NASDAQ:WOOD).

Figure 3 - iShares Global Timber & Forestry ETF Daily Candles November 10, 2020 - June 15, 2021. Source

So, we see some interesting potential weekly candlestick formation in the Lumber futures and an interesting daily candle in WOOD. While the 2 instruments do not trade a perfect or near-perfect correlation, a correlation exists.

I like the idea of getting long the WOOD ETF based on the action in the Lumber futures markets.

While trying to catch a falling knife can be a precarious proposition, I view this as buying a pullback in a bull market. While we discussed certain levels in the June 9 publication, I would like to explore some different levels and a potential scaling/tranche entry strategy today.

And, while the price of gold certainly hasn’t caught an inflation bid (at least not yet), this could be a wooden opportunity. Maybe a wooden opportunity is the new golden opportunity.

What’s Your Trade Ahead of the Fed? Wooden Opportunity?

Related Articles

What’s Your Trade Ahead of the Fed? Wooden Opportunity?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email