Commodity ETF Alert October 2010 Portfolio Update
October 26, 2010
Many commodities are continuing their impressive run. The markets really started heating up during the summer months… and the trend has been pretty much straight up every since.
Check out these 3-month returns for some of the highest flying commodities…
Silver up 30%. Cotton up 70%. Sugar up 63%. Grains up 28%. Tin up 40%. Remember, these are just 3-month returns.
Pretty impressive, right?
There are several factors driving commodity prices higher. These include economic and political uncertainty, fears of inflation, and supply/demand fundamentals. It’s all working together to create the perfect bullish commodity storm.
No matter the reason, it’s all good news for us.
We’re holding a diverse basket of commodities in the portfolio right now. And more importantly, we’re profiting from the current commodities surge.
Let’s take a look at our positions…
Position Updates
. . . . United States Heating Oil Fund (UHN) – Buy up to $28.50
Our most recent trade is holding steady. UHN is sitting in the $27 range… right where we bought it.
Cold weather hasn’t hit the country en masse yet. As temperatures drop, we should see the demand for heating oil jump. And once the rush begins, it won’t slow down until warm weather arrives.
And that should give us a nice bump in UHN.
What’s more, as the economy improves, we should see the demand for diesel pick up. That will also push prices higher in UHN. Remember, heating oil serves as a proxy investment for diesel.
Either way, I like how UHN is setting up right now. So, if you haven’t grabbed your UHN shares yet, go ahead and get them now.
. . . . iPath DJ-UBS Grains ETN (JJG) – HOLD
Grains are definitely getting a boost during the recent commodity boom. Our JJG shares have jumped 10%. That’s a great return in under six weeks.
The big news this month… corn. A recent USDA report showed corn supplies are much tighter than expected. It was quite the shocker.
Not only did corn shoot up on the news, so did wheat and soybeans. Fortunately for us, we hold all three through our investment in JJG.
I expect to see even higher prices in JJG. Let’s hold on to our shares.
. . . . iPath DJ-UBS Platinum ETN (PGM) – HOLD
Another solid month for platinum. We’re up almost 10% to date in PGM. Not too shabby!
Precious metals are hitting some resistance at these levels. But keep in mind, platinum acts as a precious metal and as an industrial metal. And industrial metals usually do well in times of economic recovery.
Bottom line, even if precious metals pull back a bit, there’s always the potential for a bump from the industrial side.
Let’s hold on to our PGM shares for bigger gains.
. . . . iPath S&P GSCI Crude Oil Total Return ETN (OIL) – HOLD
Oil is finally sustaining a price above $80 a barrel. After months of mostly sitting in the $70 to $80 range, it’s nice to see the breakout to the upside.
However, I’m not convinced this price level is going to hold long-term. Oil inventories are still on the high side. We’ll need to see reduction in inventories for a further move higher in oil price.
The good news… as the economy improves, demand for oil should start eating into the oversupply. When that happens, we can expect to see an even bigger jump in oil prices.
Let’s continue to hold on to our position in OIL for now.
. . . . iShares COMEX Gold Trust (IAU) – SELL
Gold is still sitting at near record high levels. So, we think it’s time to take our profits off the table.
Here’s the thing…
To date, we’re up a fantastic 40% in IAU. But we’ve hit some resistance recently. It’s very possible we’re going to see a pullback in gold prices as investors digest the latest economic and political news.
I still like gold for the long-term. So don’t be surprised when we jump back into IAU shares down the road.
For now, let’s sell our shares of IAU and lock in our big profits. Congratulations on a winning trade!
. . . . iShares Silver Trust (SLV) – SELL
Sometimes, silver can shine brighter than gold.
Believe it or not, silver actually outperformed gold! We’re up an astounding 42% in our SLV trade.
And just like gold, it’s time to sell.
It’s time to take our profits in silver for the same reason we’re selling gold. I think volatility is in our immediate future… so it’s always good to lock in profits.
Let’s sell our SLV shares and reap the rewards. Nice job everyone.
. . . . iPath DJ-UBS Cocoa ETN (NIB) – Buy up to $45.50
Cocoa is holding tight for now. As I write, NIB breached the $42 mark and is making its way higher.
And the fundamentals look good for still higher prices.
Cocoa is already receiving a nice bump from pre-holiday sales. What’s more, elections are coming up in the Ivory Coast which could significantly impact cocoa production and exports.
This sort of uncertainty almost always drives prices higher.
If you haven’t done so, grab shares of NIB while it’s still in our buy range. We could be on the cusp of a big move up.
Action To Take
- Sell iShares COMEX Gold Trust (IAU)
- Sell iShares Silver Trust (SLV)
Category: Commodity Trading
