Commodity ETF Alert February 2012 Portfolio Update

February 28, 2012

Oil Bulls Are Charging…

Without question, bulls are sitting in the drivers seat when it comes to oil.  In just two short weeks, crude jumped from $101 a barrel all the way up to $110… a 9% pop.

Take a look…

It’s really quite simple.  Fears of further deterioration in the Iranian nuclear standoff have the oil market on edge.  Recently applied UN sanctions need to bring Iran back to the bargaining table… and soon.

If they don’t, things could get ugly.

Of course, this should be of no surprise to you…

We’ve talked at length in recent reports about what the Iranian situation could do to oil prices.  And now here we are… oil’s within a few dollars of last year’s high of $114 a barrel.

So, what should we do with our USL position?

Let’s find out…

Position Updates

. . . . United States 12 month Oil (USL) – Sell Half

Thanks to oil’s recent run, our USL position is up a sweet 29%.  What’s more, USL has actually surpassed the $46 profit target set when we initiated this trade back in August 2011.

So here’s what we’re going to do…

We deserve to be rewarded for buying oil when other investors were shaking in their boots last summer.  So let’s sell half our USL position for a 29% profit.

But since there’s still plenty of uncertainty with the Iranian standoff, let’s hold our remaining USL shares for more gains.  If things go from bad to worse, we could see big upside for oil in coming months.

. . . . iShares Gold Trust (IAU) – Sell 

It was just three short months ago that gold naysayers were all over the business news channels screaming about a “top” in the gold market.  At the time, these gold ‘experts’ were calling for the yellow metal to fall under $1,000 an ounce in 2012.

Hopefully you didn’t listen to them…

Since the start of 2012, gold’s UP over $225 an ounce… a 15% jump.  And that means our IAU position is once again sitting on solid profits.

As you know, we initiated our IAU trade in February of last year when gold was trading for $1,350.  And we sold the first half of the position when gold traded over $1,800 last summer.

Now it’s time to collect the rest of our profits…

The recent rally has pushed gold to within a whisker of $1,800.  And since that’s an area of technical resistance, we could see some short-term selling in the very near future.

So let’s take gold’s recent strength as an opportunity to sell our remaining IAU shares. Doing so will give us a 30% profit on the second half of this position.

Averaging out our two sell points- a 37% gain on the first half and a 30% gain on the second half –we get an average gain of 33.5% for the entire IAU trade.

No matter how you slice it, that’s a sweet trade! Congratulations!

. . . . Sprott Physical Gold Trust (PHYS) – Hold

Now, just because we’re taking profits on IAU doesn’t mean we’re giving up on gold.

Quite the contrary actually…

Gold still has hefty upside potential due to inflationary policies held by the world’s central banks.  As long as politicians keep piling on debt and spending like drunken sailors, gold’s going to remain a highly desired asset.

So don’t think for a second that we’re getting bearish on the yellow metal.

Now that we’ve taken all our profits in IAU, our only gold holding is PHYS…

This is the perfect ETF to capture gold’s additional upside.  But since the yellow metal’s already had such a strong start to 2012, PHYS is now beyond our buy-up-to-price of $15.00.  Of course, that means I’m moving it to a hold.

All signs point to higher gold prices in 2012. Let’s keep holding PHYS for further gains.

. . . . United States 12-Month Natural Gas (UNL) – Buy up to $20.00

Natural Gas is still hanging around the $2.50 mmBtu level.  Like I said in recent reports, I’m not expecting a staggering natural gas rally anytime soon.  But I do think prices are forming a major multi-year bottom around these price levels.

Adding UNL to your portfolio now should pay off nicely in the long run.  But without question, you must be very patient with this trade.

If you haven’t already, buy UNL up to $20.00.

. . . . iShares Silver Trust (SLV) – Hold

After getting bucked off in 2011, I think silver is back in the saddle again…

Last year’s highly volatile silver market is shifting back into the bull’s hands.  The shiny metal is already up 32% since the start of the year.

And all signs point to further gains…

Investors the world over are realizing silver is an inexpensive way to hedge against inflation.  Of course, that’s sending investment demand through the roof.

What’s more, recent data suggests the US economy is strengthening.  And that means industrial demand for silver should strengthen as well.

Silver’s rally over the past two weeks has pushed SLV beyond our buy-up-to-price of $33.00, which means I’m moving it to a hold.

This could be a big year for silver.  Keep holding SLV for further gains…

. . . . iPath Dow Jones–UBS Livestock (COW) – Buy up to $30.50

All the fundamentals are still firmly in place for higher cattle prices.

What’s more, live cattle prices were able to break above the $1.26 resistance level I talked about in the last update.  As a result, COW popped to $31.00 in recent trading.

Let’s give COW some more time to establish a solid upward trend.  If you haven’t done so already, buy COW up to $30.50.

. . . . ETFS Physical Palladium Shares (PALL) – HOLD

Like I said a minute ago, recent economic data suggests the US economy is picking up steam.  Unemployment numbers are dropping and manufacturing data is improving.  But more importantly, consumer confidence is getting better.

And that’s a huge plus for the auto industry…

Both Ford (F) and GM (GM) are turning in strong 2012 sales numbers.  And since palladium is a prime ingredient in every engine’s catalytic converter, strong auto demand translates into solid palladium demand.

After a slight pullback last week, palladium is on the verge of breaking to new 2012 highs. If palladium can break above $720 and hold for a few days, we’ll likely see the industrial metal make a break for $760 in coming weeks.

Obviously, such a move would be great for our PALL position. As of today, we’re sitting on a 9% gain in PALL.

Keep holding it for more upside…

. . . . iPath Dow Jones-UBS Sugar (SGG) – HOLD

That was quick…

SGG, our most recent addition to the portfolio, is already up 9%! 

Why is sugar making such a quick move to the upside?

It’s simple, Brazilian supply fears are getting priced into the market.  All the things we talked about in the last report are weighing heavy on sugar investors’ minds.

Sugar’s recent advance has pushed SGG well beyond our buy-up-to-price of $85.50.  As a result, SGG now sits as a hold. 

The supply fears will likely keep the sugar market on edge for the next few months.  Let’s see if SGG can jump to our $100 price target.  Keep holding for additional gains…

Category: Commodity Trading