Precious metals tend to be the commodity segment of choice for those looking shelter against market volatility and uncertainty. Given the rising geopolitical tension, as evident by the stories that have dominated the headlines in recent days, traders will become more sensitive to headline risk, and a seemingly small story could act as catalyst for increased buying pressure in gold, silver, platinum and palladium. In this article, we take a look at the charts of three exchange-traded funds (ETFs) that are commonly used for gaining exposure to these metals and analyze how traders will look to position themselves for a move higher. (For further reading, check out: When in Doubt, Buy Precious Metals.)
PowerShares DB Commodity Index Tracking Fund
Some investors may not quite feel comfortable with an overweight position in precious metals and may prefer to have diversified exposure to a broad basket of commodities. One potential solution for this group of investors could be to look to the PowerShares DB Commodity Index Tracking Fund because it comprises futures contracts on 14 of the world’s most important commodities and happens to have a weighting of approximately 10% in precious metals.
Taking a look at the chart below, you can see that the price is trading within a confined trading range and that it recently broke beyond the resistance of the dotted trendline. The breakout is a clear signal that the bulls are in control of the momentum and will likely be used as a buy signal. Stop-loss orders and other protective strategies will likely use the support of the lower trendline, 50-day moving average or 200-day moving average as guides. Regardless of the strategy, based on the chart shown below, the bias is undoubtedly to the upside. (For further reading, see: 3 Charts for Navigating the Commodities Market.)
Active traders are turning to the confined trading ranges shown on the charts of commodity-related ETFs for buying opportunities. …read more
Read more here: 3 Charts That Suggest It’s Time to Buy Precious Metals
Category: DBC, GLD, SLV