Art's Charts

Two of the Four Commodity Groups Stand Out


Broad commodity ETFs are like broad index ETFs: an amalgamation of various components. Traders can improve performance by breaking these down, ignoring the weaker components and focusing on the stronger components. Let's do that with the Invesco DB Commodity ETF.

The Commodity ETF (DBC) can be broken down into the Agriculture ETF (DBA), the Base Metals ETF (DBB), the Energy ETF (DBE) and the Precious Metals ETF (DBP). Of these four components, only two are currently above their 50-day SMAs: DBB and DBA. As the chart below shows, DBB is the clear leader with a breakout on October 9th and 52-week high this week.

The Agriculture ETF (DBA) has yet to clear its September high, but sports a bullish continuation pattern. After a surge from late June to early September, the ETF consolidated with a trading range the last seven weeks. A consolidation within an uptrend is typically the pause that refreshes, or a bullish continuation pattern. A breakout would signal a continuation of the bigger uptrend.

Momentum is bullish because RSI moved above 70 when DBA advanced above the 200-day. Moves above 70 may be considered short-term overbought, but it takes strong upside momentum to get above 70 and this is longer term bullish. DBA alleviated the short-term overbought conditions as RSI dipped into the 40-50 zone and bounced in late September.

Despite relatively low volume, rates DBA and DBB A+ for liquidity. Liquidity is not driven by volume alone and there are several factors at work. For one, the liquidity of the individual components is an important factor. Agriculture and Metals futures, the components, are very liquid.

This week at we backtested the S&P 500 breadth model over the last twenty years and showed how to add more octane to the signals. There is also a post on exit strategies that compares three trailing stop indicators. Subscribers also get access to the ETF ChartBook, ETF Trends, Patterns & Setups report and the comprehensive weekend video.

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Arthur Hill, CMT

Chief Technical Strategist,

Author, Define the Trend and Trade the Trend

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Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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