Thomas Meyer, Editor
November 29, 2021
Welcome to this week’s AlgoTrendTraders Weekly Commodity report. Before we get into this week’s report, be sure to follow us on Twitter.
The Weekly Commodity Report will be free for another couple of weeks before transitioning to a paid newsletter on Substack. If you have any comments or questions, please contact us via the email address listed above.
Two Closed Trades and Two New Bearish Trades
Friday’s news of the new Covid variant shook the commodity markets which were already having a difficult week. The market action caused the bullish trades in WTI Crude Oil and Gold to hit their listed stops. The trade in WTI Crude closed with a gain of +6.25% while the trade in Gold closed with a loss of -2.26%.
There are two new bearish trades this week in Silver and Soybeans. The details of these trades are listed both in the Composite Table and underneath the Table. As there’s a high likelihood of a sharp rebound when the market opens on Monday, be sure to adjust the stops based on the opening prices.
For those wanting to know more about Trend-Trading
The overview of the AlgoTrendTraders system is underneath the charts. Those familiar with our methodology can get right to the trades. If you’re new to trend-trading, be sure to read this introductory section. This will help you understand the concept of trend-trading and why it’s so powerful.
Each week, we show you the Composite Table that has the week-ending price, current volatility, and the updated exit strategy for each of the commodities.
We say this a lot because it’s the most important element for successful investing… Always have your exit strategies prepared before you enter into any trade.
The Composite Table for November 29, 2021
WTI Crude Oil moved sharply lower last week and hit its listed stop of 73.63. The bullish trade closed with a gain of +6.25%. WTI Crude closed the week below the $70 level and in a Neutral condition. There is no trade this week.
Natural Gas traded in a wide range last week before closing strongly higher. It remains in a Bullish condition. The listed stop for this trade moved up to 4.54 which is 1.2 Expected Moves (EM) from the Friday close.
Gold moved sharply lower last week and hit its listed stop. The bullish trade closed with a small loss of -2.26%. Gold closed the week below the $1,800 level and is now in a Neutral condition. There is no trade this week in Gold.
Silver also moved strongly lower last week. It closed underneath the Transition Zone (TZ) and in a Bearish condition. The initial listed stop for the bearish Silver trade is $24.23 which is 1.0 EM from Friday’s close. Adjust the exit strategy on your trade as it looks as if Silver will open higher on Monday. Take the EM of $1.12 and add it to your entry price.
Copper moved lower last week and remains in a Neutral condition. There is no trade in Copper this week.
Corn moved higher last week and is trading in the middle of the TZ near its 200-day moving average. It remains in a Neutral condition. There is no trade this week in Corn.
Soybeans moved lower last week and triggered a new Bearish condition. The initial bearish trade has its listed stop at 1,320.25. If Beans are priced higher at the open, add the EM of 67.00 to your opening bearish trade.
Wheat closed higher again last week and it remains in a Bullish condition. The listed stop moved up to 746.25 which is 1.6 EM from Friday’s closing price.
Be Sure to Read the Disclaimer at the End of This Report
Here are the latest charts…
In this weekly report, we give you the trading signals for eight of the most liquid traded commodities. The signals are based on trend-following principles. Very simply, commodities, like stocks, stay in trends until they don’t. Trends can last a short time or they can last for months and even years at a time.
This is not a “get-rich-quick” scheme
If you’re looking to make a ton of money in a short time, you’re going to be disappointed. Trend-trading is not fancy; it’s boring, and takes time to be successful. This is a system that relies on a historically-proven process to generate solid returns on winning trades and avoid large losses on losing trades. We’re definitely the tortoise, not the hare.
Trend-following systems don’t try to guess what the next move in the markets might be. Instead, we measure the markets each week and use our algorithms to determine the current trend and the exit strategy for the current trades.
The key to the winning trades greatly outperforming the losing trades is the risk management system. If a trade moves against us, we’ll get out of the trade with a small loss. But if a trade trends higher for months at a time, we have the ability to build up substantial profits.
AlgoTrendTraders uses both trend and momentum to generate the trading signals. The yellow channel you see in the center of the charts is called the “Transition Zone”. When a commodity is above the yellow channel, it’s in a Bullish condition. When it’s below the yellow channel, it’s in a Bearish condition. When it’s in the middle of the channel, it’s in a Neutral condition and there is no trade.
Selling is More Important Than Buying
Every trade has a pre-determined exit strategy. This is based on the normal volatility of the underlying ticker. Each commodity has its own unique volatility. And volatility is dynamic. It’s constantly changing. Each week, we look at the previous 52 weeks of price movement to come up with its normal weekly volatility. This is called the “Expected Move”. The Expected Move equals one week of the normal volatility of the stock or ETF being measured. Every week, the exit strategy for each ticker is updated.
The system is based on the weekly closes of the underlying tickers. All trading information and volatility calculations are based on weekly volatility. By using weekly calculations, the system ignores the day-to-day noise in the markets and is able to give better signals.
It’s easy to see the periods of time that volatility increases and decreases. As the yellow channel Transition Zone widens on the charts, the volatility is increasing. The opposite is true; when the Transition Zone narrows on the charts, the volatility is decreasing.
The best time to enter a trade is when a new signal is given. This gives you the greatest opportunity to get into a trend that could last a long time. Though it’s possible to get into a trade after a trend has been in place for a while, the risk in that trade is elevated. Consider using 1/2 or 1/3 of your normal investment for these situations.
Commodity trading is for experienced investors who understand leverage and trading on margin. It’s possible to lose more than your initial investment even with a stop in place.
The information published in this newsletter should not be used to make personal investment decisions. We are not licensed by any federal or state entity to give investment advice. We do not know your personal financial situation. Investments should be made only after consulting with your professional investment advisor and only after reviewing the prospectuses or financial statements of the companies in which you’re considering investing.