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Commodities have been moving higher with the broad equity markets over the last two months in a sympathetic bet that economic growth will stabilize and resume its upward trajectory later this year and into 2010. But most of those futures markets now look tired and stretched,

raising doubts about the resilience of buying interest

in the months ahead.

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Still, it's unlikely all commodities will trade in lock step as we head into the warmer months of the year. Specifically, the gold and silver complexes are dancing to the beat of a different drummer these days and could be headed substantially higher through the summertime. I'll focus on trading opportunities in those groups later in this column.

Commodity-related equities are especially risky going forward because they respond to the vagaries of the futures markets as well as the tug and pull of the broader indices. A selloff in the

S&P 500


Dow Industrials

concurrent with a futures downturn would have a dramatic effect on these stocks, because they would lose both sources of uptrend support.

Nowhere is this risk more acute than in the oil services sector, which has taken off like a rocket since the

Oil Services HOLDRs

(OIH) - Get VanEck Oil Services ETF Report

ETF broke out of a five-month basing pattern in April. That instrument has risen more than 20% in the last three weeks but has now hit major resistance at the 200-day moving average, as well as October and November swing highs.

As I pointed out in Monday's column, banks and small-caps have also pulled into this major line in the sand, highlighting the theme of

growing risk in this May market. Simply stated, it's an inflection point where traders and investors wrongly believe that rally momentum will be stronger than the large-scale mean reversion signified by the price zone.

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In fact, it's always a weak-handed bet to get long into this resistance level, in anticipation of a big breakout. A much wiser approach is to lighten up considerably on long-side positions, and wait until a) there's a real breakout above this major barrier, or b) prices pull back deeply enough to justify the risk of buying new shares.

So now is a good time to sell a majority of your oil services positions and to wait for a more favorable opportunity. That might come a month from now, or never, because we're in uncharted territory after the massive spike off the March low. The bottom line is there's no good reason to expose your hard-earned profits to a summer market full of question marks.

Rising copper futures have driven the industrial metals sector higher, and those equities have booked fantastic gains since the March low.


(FCX) - Get Freeport-McMoRan, Inc. Report

, for example, has doubled in price and is now trading near a seven-month high. But upside momentum has been fading in the brown metal, which is also stuck at the 200-day moving average.

Note the blue line at $2.40. That level marks resistance from a massive double top that was broken in October 2008. This barrier would severely limit the upside that follows any breakout over the April rally high near $2.25. This raises a warning flag, with steel, iron and copper equities all exposed to the increased risk of a broad downturn. My advice, as with the oil services stocks, is to thin out positions and wait for better entry points.

As I noted at the top of this column, precious metals are tracking a different path than energy or copper futures these days, responding to the inflationary effect of massive government stimulation. The gold contract is holding $900 after a six-week pullback and is now trading back above the 50-day and 200-day moving averages. This forecasts a strong run at the rally high, perhaps as early as this summer.

But the gold pattern needs more work before the technical outlook starts to fire on all cylinders. Specifically, take a look at the lower highs carved out since February. This bearish sequence needs to end with a rally up and over $970. Until that happens, there's continued risk of a downturn that hits the lower blue line, currently at $825.

Precious-metals equities could be the bull trade of the summer as the underlying commodities work their way up toward new highs.

Seabridge Gold

(SA) - Get Seabridge Gold Inc Report

is my favorite play in the sector. It's recaptured the bulk of losses posted in the 2008 crash and is now testing 12-month resistance at $25. A breakout could start the final leg into the 2007 high at $39.50.

Other gold and silver stocks with bullish price patterns include


(IAG) - Get IAMGOLD Corporation Report


Randgold Resources

(GOLD) - Get Barrick Gold Corporation Report


Compania De Minas Buena

(BVN) - Get Compañía de Minas Buenaventura SAA Report


Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.

At the time of publication, Farley had no positions in the stocks mentioned, although holdings can change at any time.

Alan Farley is a private trader and publisher of

Hard Right Edge

, a comprehensive resource for trader education, technical analysis, and short-term trading techniques. He is also the author of

The Daily Swing Trade

, a premium product that outlines his charts and analysis. Farley has also been featured in





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. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks.

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