Could the Lumber rebound mark the beginning of a major year-end recovery?

[MongiIG]

Lumber prices on track for a big October rebound, but could this represent the beginning of a major year-end recovery

 Joshua Mahony | Senior Market Analyst, London | Publication date: Monday 24 October 2022 

 

Lumber price starts to regain lost ground

Lumber has enjoyed a positive October thus far, with price currently on track for the best monthly performance since February. While many will be thankful for the decline in key commodities such as Lumber, this may be about to change if seasonal trends are anything to go by. Looking at the 15-year averages, we can see that the fourth quarter has often proved the saviour for bulls. That year-end rally could yet come to fruition this time around given the fact that we are currently on track for a 23% rise in this month alone.

Source: Equity Clock

A breakdown of those numbers highlight that November typically provides the best average return (7.4%), with December proving the most reliant month for bulls (73% gain frequency).

Source: Equity Clock

Charts signal potential for a major bullish reversal

The monthly chart brings a wider perspective, with price having slipped back into the $411 level that represented the peaks in 2005 and 2013. While price has slipped below the crucial $460 support level, the $20-40 zone does represent a historical area where price trades within. That highlights the potential for price to reverse from this region.

Source: Equity Clock

The daily chart highlights how the selloff has been losing traction. The recent rebound takes price into the 76.4% Fibonacci resistance level at $540. Crucially, we remain within a trend of lower highs, with a push through the $578 swing-high required to signal the end of this bearish 2022 trend.

Source: Equity Clock