Three Ways to Get Into Commodities

This column was originally published on RealMoney on Nov. 9 at 1:37 p.m. EST. It's being republished as a bonus for TheStreet.com readers.

With stock rallies grabbing all of the headlines, it's easy to miss the stealth bull market taking place in some of the lesser-followed commodities. Over the past month, wheat and corn have gone parabolic, surpassing highs set more than a decade ago.

More widely followed commodities, like gold and crude oil, have lagged behind, but as I recently pointed out, gold was starting to get some its shine back.

Crude oil, an underperformer, has been basing near support after a three-month selloff, but it appears to be headed higher now that the election is over.

So let's look at three different ways to gain commodity exposure.

Big-Picture Play

The most comprehensive way would be with the PowerShares DB Commodity Index Tracking Fund (DBC), an ETF that tracks a basket of six commodities. It has about 35% of its assets in light sweet crude, 20% in heating oil, 12.5% in aluminum, 11.25% in corn, 11.25% in wheat and 10% in gold. Here's a daily chart.

PowerShares DB Commodity Index Tracking Fund

Click here for larger image.

Source: The TechnicalTake.com

Since hitting a three-month low in mid-September, DBC has been making a series of higher lows. Volume is also supportive of the price pattern, with accumulation days exceeding distribution days by about two to one since September.

DBC is now in a low-volatility squeeze, and as volatility reverts to the mean, I expect prices to move rather quickly and break out higher from this range. The first target is at $25.50, which is the downsloping orange trend line drawn from the May 2006 highs. The $26.50 level is the next area of resistance. A stop-loss should go below the most recent pivot low at $24.37.

A Smaller Focus

If you want to concentrate all your efforts into one commodity, then I believe the United States Oil Fund LP (USO), which tracks the price of crude oil, offers the greatest potential. Here's the daily chart.

United States Oil Fund LP

Click here for larger image.

Source: The TechnicalTake.com

1 2 Next › Last »