Yet Another Winner!?!

| October 28, 2009 | 0 Comments

Last week I came down with a slight case of the flu.  I don’t get sick very often and luckily this case was short lived.  But nonetheless, the boss man sent me home to recuperate (read: not get everybody else in the office sick).

In my downtime, between hours of sleeping and watching Star Wars for the 100th time, I got to looking at some charts.

You see, I love looking at charts.  I actually take my work home with me all the time.  Whenever I have a few minutes of downtime, I’ll go through some charts.  I’m always on the lookout for low risk trading opportunities.

I also did a little follow up on a trading opportunity I told you about in a recent issue.  It was from three weeks ago when we went over the aspects of a technical setup called a triangle.  In case you missed it, that article was titled “Grab Explosive Gains With This Chart Pattern”.

Let’s do a quick recap for those of you who missed it.

A triangle is a technical setup that’s sometimes seen before a big move in a stock.  By looking for these patterns, you can position yourself to catch explosive shifts in buying and selling activity.  If you get in on the right side of the trade, you can pull in some hefty profits.

The particular opportunity I told you about was in the DB Commodities Tracking Index Fund (DBC).  DBC was just about to break out of a triangle when I mentioned it on October 7th.

As you can see, DBC worked out exactly as planned.  We got the upside break out of the triangle pattern.  The entry for this trade, as I stated, was a break above $22.75.  If you got in this trade at the correct entry price, you’re sitting on a nice winner.

In the October 7th article, I also stated the $24 area was an area of resistance, which would be a good area to take profits.  DBC has broken through the $24 resistance zone and is now pulling back to it.  If you took profits on the move through $24, congratulations!  Not bad for a couple weeks work!

If you’re still holding DBC, I would move your stop loss to breakeven, as this pattern has had its expected outcome.  Never let a winning trade turn into a loser.

But DBC may have room to run…

If recent trends continue, commodities such as oil, gold, wheat, and corn (which DBC holds), may continue to run.

Oil is trading around $78 this morning, which is up around 14% from just a couple weeks ago.  Gold is still trading above $1,000 an ounce, with lots of room for further upside.  Wheat and corn are just coming off multi-year lows.  They’ll be in high demand due to an ever growing population.

With DBC, you’re getting in on all of these trends at once.

Remember, the golden rule of trading goes like this: “Cut your losers quickly, and let your profits run.”

This is a perfect example of making our money work for us.  By doing a bit of homework and finding a low risk entry point, we were able to capture a profitable trade in less than three weeks.

Don’t you love the markets?

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Category: Technical Analysis

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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