Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Basic Materials Sector Stocks Investor Opportunities

Commodities / Metals & Mining Dec 30, 2013 - 02:53 PM GMT

By: Rambus_Chartology

Commodities

Rambus Chartology has been focusing on the Precious Metals for the most part as that is where the most compelling Chartolgy has been.

But tonite I would like to switch gears and visit a different sector which is looking very interesting to say the least.

About every two or three months or so I do a post on the Basic Materials sector just too keep an eye one what is happening there. It has been somewhat mixed for the most part but it now seems to be gaining some momentum. As you know I've taken a couple of position related to the area recently. I tried the shippers a month or so ago but got stopped out on a hard backtest but I could see the potential starting to build for this undervalued area. The latest bout of strength still hasn't shown up in the CCI commodities index as it has been flat lining on top of a long term support and resistance rail that goes all the way back to 2007. So far the CCI has corrected 50% of the move off the 2008 low which it has been holding for some time now.




The GNX is still trading inside a big blue triangle that maybe getting close to breaking out. That top blue rail has five touches on it so far so we know it's hot.



There are several etf's out there that track the basic materials sector. One of my favorite ones is the IYM that is now just testing its all time highs going all the way back to the 2008 high. Its built out an almost two year blue triangle that has broken out and had its backtest. As you can see the price action is sitting right on the all time high, black dashed horizontal rail, at the top of the chart. Regardless of what we think of the fundamentals we have to respect the strength in this sector.



Another etf that tracks the basic materials sector is the XLB.



Below is a weekly 3 X bull etf for the basic materials sector, MATL, that closed the week at a new high for this stock. It has very light volume though.



Lets now look at some of the stocks that makeup this sector as some of them are part of the Dow Jones. DD is a big part of the Dow Jones and shows why the Dow is still making new highs. On the monthly chart below you can see a beautiful red triangle that broke out sometime ago and is currently in an impulse leg higher.



The monthly chart for IP shows it's trading at all time highs.



Dow Chemical is going to close out the month of December at new all time highs.



CNX is still well below its all time high but it looks like it could be forming a flat top expanding triangle.



APD is breaking out to new all time highs.



AA is another stock that has recently broken out of a blue triangle consolidation pattern.



The weekly look for AA shows there is still a lot of room to move higher for this stock. It created an 11 point bullish falling wedge reversal pattern to end its decline.



There are several areas in this sector that have yet to really takeoff yet and are still undervalued. There's an old saying that states, how copper trades so does the stock market. This means if copper is strong so should the economy and vise a versa. I think copper finally showed its hand this week after breaking out if a nice eight month inverse H&S base. Its been lagging the Dow Jones for quite sometime but maybe it's getting ready to play catchup.



The weekly look at copper shows just how weak its been since topping out in 2011. It built a beautiful 6 point blue triangle consolidation pattern but so far has failed to follow through to the downside. Note the small inverse H&S base on the lower right hand side of the chart that is the same inverse H&S base that I showed you on the chart above. This could be a very important development.



As I have shown you many times in the past, a triangle can morphing into a bigger triangle, that doesn't change the direction of the move, but just creates a bigger triangle. The monthly chart below shows how copper is morphing into a bigger triangle. Note the two red circles that shows the failure of the top and bottom rails that is creating the bigger blue consolidation pattern.



Coal is probably the weakest area inside the basic materials sector. It built out a beautiful H&S top with a blue triangle just above the neckline and red bearish rising wedge just below the neckline. This is usually a bearish setup. As you can see KOL, the coal etf, is basically trading in no man's land at the moment.



Even though the KOL, coal etf, is trading sideways there is a coal stock, ACI that is close to breaking out of a 5 point blue triangle reversal pattern to the upside. This stock looks like a very good bargain in here for the next year or two if it takes out the top blue rail.



The weekly chart for ACI shows why it could be such a great bargain down here. Buy low and sell high applies to this stock. As you can see its been in a three year bear market with one consolidation pattern forming below the next. Now we may see a 5 point triangle reversal pattern forming at the bottom. This is a perfect Chartology chart of a bear market, complete with a topping pattern and hopefully a bottoming pattern with consolidation patterns that make up the bear market.



I believe the hottest area in the basic materials sector right now are the steel companies. First lets look at the SLX which is the steel eft. I have to admit I've been watching this rally taking place for sometime now and never pulled the trigger. Its been building out some very nice chart patterns that have shown this etf to be in a bull market. Note the nice inverse H&S bottom followed by the red bull flag that formed just below the neckline and the red bullish falling wedge that formed just above the neckline. As I have shown you in the past, when you get a consolidation pattern that forms just below the neckline and then one that forms right on top of the neckline this is almost always a bullish setup. As you can see the SLX broke out of a 6 point blue triangle last week.



When looking at the daily chart above it looks like we already missed the big move up but when you look at the weekly chart you can see the rally is just really getting started. Just like the copper chart I showed earlier that had a morphing triangle, SLX also has the same morphing triangle as shown by the red circles. These morphing triangles can be very aggravating as they will give you a false buy and sell signal. When the price action doesn't follow through after the breakout that is when you start to take into consideration that the triangle maybe morphing, It's still valid only it will be just a bit bigger than previously thought. Most give up on these types of patterns but I find them very useful when its all said and done.



Lets now look at some individual steel stocks that are showing some strong moves taking place. Of all the steel stocks I follow AKS has probably been the strongest. You can see it had a nice inverse H&S bottom that completed with a big breakout gap. It hasn't hardly stop to rest yet.



The weekly chart for AKS shows there is still a lot of upside potential left in this stock. At some point it will start to form a good consolidation pattern and that's when it will be time to pounce.


NUE has been one of the strongest steel stocks as shown by the weekly chart. Note the red triangle that formed right on the top rail of the blue triangle. This was a bullish setup.



The last chart I would like to show you is a weekly look at US Steel that put in a five point bullish falling wedge reversal pattern to the upside. As you can see there is a huge potential for this stock.



The basic materials sector is telling us that there is truly a global recovery taking place at the moment. How long this recovery lasts is anybodies guess. The shippers have been confirming this for sometime now and we can't ignore what the charts are telling us. It's never just black and white as there are always cross currents running through the markets that can make them difficult to read sometimes. With Chartolgoy on our side we can keep on top of the changes even though the fundamentals might not agree with what the charts are saying. It looks like there are some good bargains in this sector that we can take advantage of if we can keep a clear mind.

All the best

Gary (for Rambus Chartology)

http://rambus1.com

FREE TRIAL - http://rambus1.com/?page_id=10

© 2013 Copyright Rambus- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Rambus Chartology Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in