NEW YORK (TheStreet) -- Lumber is a relatively difficult market to follow. The easy part is new home and multi-family construction -- because statistics are collected -- but lumber is used in many other ways that are not monitored as closely. Supply statistics come out late. Enter the chartist who is content to just watch the price action of lumber.
Lumber prices, as seen in the chart above, have trended lower the past twelve months, only interrupted once with a $50 counter-trend rally. Take notice of the price and momentum study since late July. Prices have made lower lows, but the momentum study in the lower part of the chart is making a higher low and the rate of price decline is slowing! The decline is slowing because someone is buying! This could be foreshadowing a subsequent rally.
We probably don't want to deal in the futures or the cash commodity, but a dividend-paying lumber company or REIT could be more practical.
The Plum Creek Timber REIT (PCL), above, has been in a prolonged downtrend after its 2012-2013 markup. Notice how the selloffs in 2014 were steeper than the declines, more recently. Slowing declines suggest a turnaround could be in the offing. Investors can collect a healthy dividend from PCL while a base develops.
Weyerhauser (WY - Get Report) has a much longer markup phase in the chart, above, and a shorter decline. The On-Balance-Volume (OBV) line is still pointed down, but a bullish divergence from the momentum indicator suggests prices of WY should rebase soon.
Rayonier (RYN - Get Report) is saying "buy me" in the chart above. RYN has had a series of declines the past 18-months but each selloff has been on a higher momentum reading. The trend is still down, but the indicators suggest a reversal is right around the corner.