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Strong Trend for Lumber

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Big day and a bullish push and bounce off that 51k but what’s interesting is it’s on the back of relatively non exciting volume. 485 lots accordingto the daily IG chart.

 

If you look at say, the last 5 sessions you can see therejs falling volume, and go into the H1 you’re only gonna see that come at the 19.00pm push just before market close.

 

Session today will be the decider, but I’m on the fence with this one.

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Strong push through resistance and 55,000 is as,  says, on the cards. There are no historical resistance levels above, the last prior resistance turned support held well, no reason to suspect this latest level won't also act as good support (stop) level.

 

 

Lumber_20180405_20.34.png

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The positive and bullish price action for Lumber has arisen from the wildfire led supply restrictions in Canada and the US. Also the hurricanes and tariffs imposed by the US government on Canadian imports.

 

The story from a fundamental perspective is strong and supports the trend shown from a technical perspective based on the charts. This is a very good example of where fundamental and technical analysis support each other and the result is the bullish trend in Lumber over the last couple of years.

 

I think from experience as production normalises and the supply situation improves then the price action will lose some momentum. In my opinion the strong demand in the US and the tariffs on Canadian Lumber should help keep a solid base and a floor under the prices. 

 

The chart for Lumber reminds me of chart for Brazil 60. Both have seen extremely bullish upward trends over a similar period of time. Both have been wonderful long plays. It just shows it is not about the 'sexy' oil or gold plays. Smart money is made in trades where many least expect.

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$55,000 has been hit as I predicted. 

 

This is a perfect example of how long a strong trend which is extremely bullish can last. Trends can last a lot longer than what most investors and traders think. 

 

Lumber_20180425_20.11.png

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New highs being made by Lumber. It hit $56,200.60 today.

 

When new highs and higher highs are being made then this is simply a trend followers dream. 

 

I accept for those new to trend following that buying or adding to your existing position is difficult when the price is trending so strongly upwards as one is conditioned to buy when the price goes down. This can still be done using oscillators in a strong trending move like Lumber when one is unsure when and how to enter. 

 

One must never fight the trend or simply trade against it. That is extremely dangerous and on the balance of probability you are likely to lose in those situations.

 

From a fundamental perspective, Canada's rail crunch is adding to the soaring cost of Lumber. Add Trump's tariffs and duties along with technical strength then this is a trend that comes once in a generation. Add leverage to this cocktail and the mix is quite simply exhilarating. 

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$60,122.90 hit today. WOW!

 

What a trend!

 

The risk here is that speculators are now pushing the price up. There could be a sharp fall at any moment so any short term trend reversal could lead into an amplified drop. This could be a possible shorting opportunity to make some profit in a very short space of time but only if any signals / indicators suggest a trend reversal which is certainly not the case at the moment. 

 

 

 

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So here’s the question - would you be reducing your position at this stage at all? Also what sort of signals do you personally trade to show a reversal?

 

I glad you posted this as I opened a small position on the back of it... and it’s done quite nicely

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,

 

I personally would not be reducing my position at this stage. If anything I would be adding. I tend to 'pyramid' upwards so as the price increases I would add to my position on strength. Using oscillators you can buy on any drops/corrections during an uptrend to attempt a more efficient buying price.

 

As I follow the price action then it that very price action that will ultimately signal to you that a possible trend reversal is coming. Whilst watching the price action one of the signals is when the trend begins to slow down. If your are monitoring the price action closely then you will pick up on this signal. There is normally a break in the trend line. Another signal is a strong move against the trend which is normally followed by a pullback. Another signal is when you  see lower highs and lower lows. That is normally a very good indicator which signals a trend reversal. You can also use pivot points but I find trend lines are a very good place to start if you do not have much experience in identifying trend reversals. 

 

What I have suggested above is not 100% guaranteed to be successful but it offers you the best possible chance of predicting potential trend reversals. Spotting weakness in the trending move is a good place to start. For me the key is to follow the price action closely and when you live and breath using price action as a key indicator then you will generally get a feel of the trend weakening as it is occurring but this comes from experience. 

 

I am glad your position is doing nicely and I am glad to have helped. 

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Great post good to read what people are interested in and how they trade these markets, especially with the lesser traded ones like soft commods.

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Watch out for a big sell off.

 

Anything below $54,000 and I would be a seller looking to short. However, I have seen such large corrections only for the move upwards to continue. 

 

The next few days will be interesting. There is an excellent shorting opportunity but the risk is that the move upwards continues so the stop loss strategy needs to be given some careful thought.

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If Lumber drops below $51400 price area then for me the only move is being short. 

Over the past couple of years Lumber has shown an extremely strong upward trend. In fact it has been one of the strongest trends around the world. 

When looking at moving averages, I think for Lumber, one needs to look are more long term moving averages due to the length of time of the trend which has been a couple of years.

Now this could be a mere large correction before the trend resumes upwards. At this stage one simply does not know. So one trading idea could be to go short and if the trend reverses back to its long term move upwards then one can always go long again. Another trading idea would be to exit any long position, take profits, and sit on the sidelines to establish if it is a large correction and if so and Lumber resumes its move back upwards then to re-enter. This way profits have been taken. 

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Weren’t you a seller at 54k tho? Did you get in on that trade then? 

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Interesting chart, price still above strong support and the 200 day MA but Lumber had a second go at that support level on Friday so the US open today could give some clues for both short and long term direction.

The futures market also see this as a pivotal time.

Also, keep an eye out for the US Building Permits data out on Wednesday 1:30 BST.

Daily charts

Lumber_20180716_08_51.thumb.png.d2d0b35e892686244dc547bc8e50be28.png

Lumber_20180716_08_57.thumb.png.9252495b18b0aa422e3d30c397bda777.png

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@PandaFace, yes thats right. I did and I still have a short position on Lumber. Time will tell if my timing was right. 

My posts are more for people who do not have a position on Lumber and are looking for trading ideas both long / short. 

 

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I think the short trade is the only trade on at the moment for Lumber. 

Normally these short moves are far quicker than the long trades. Speculative capital will begin to unwind now creating a big shorting opportunity in Lumber.

The price action is telling us a story and one can make assumptions based on what we expect to happen going forwards.

Lumber_20180718_19_12.thumb.png.6500110eb93302ef2d5166da4547b017.png

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When looking at Moving Averages then one can clearly see that Lumber's price has fallen below the 20, 50 and 100 day moving averages. This is an indicator based on price action to short. The chart below will illustrate my point. As a trend follower one must embrace both the long and short trades. So Lumber is excellent as one would have made money on the way up and now one can make money on the way down on the same commodity. This way it does not matter when the commodity is trending up or down. If you trade with the trend then it simply increases the odds of success. It does not guarantee it by any means but it simply increases your chances.

Lumber_20180719_20_40.thumb.png.047d351c327da03cec15d429e6bc74e2.png

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Great post. Lumber futures have now gone limit down (meaning the CME no longer accepts sell orders) ,immediately on open, 2 days in a row. As you say, does seem to be trending recently. 

Just as an FYI, when this does happen our market will switch to phone dealing only.  Certainly one to watch tomorrow afternoon (opens at 15:00).

sg2018071977095.gif

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Strong downtrend in play. 

I think $41457 level will now be key. If this is breached then $34000 could be the target. 

Lumber is a brilliant example of profiting on the long trend upwards and then profiting on the big move downwards which will be far quicker than the long trend upwards.

Short trades are far more shorter in timescale in my experience. If you look at the charts then you will witness the sharpness of the move downwards. It is violent and on these you must not try and be clever and try and go long. You could get a sharp reversal due to some fundamental news that supports Lumber but one can only go on experience and price action now. If I am wrong and it shoots up then that is fine but based on probabilities, most trades with similar charts would be short.

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I do hope those who have been following this thread have been shorting Lumber.

If the aim is to make money and to make as much profit as possible then one must have an open mind. One must not get bogged down with traditional assets or what I call 'sexy' trades. Lumber may not be the most exciting sounding trade but if you look at the trend upwards and now the downtrend in play then it has given you plenty of opportunity if you were following trend following principles to go long and profit and now go short and profit. 

Add leverage into the bowl and you get a nice profit mixture.?

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10 hours ago, TrendFollower said:

I do hope those who have been following this thread have been shorting Lumber.

If the aim is to make money and to make as much profit as possible then one must have an open mind. One must not get bogged down with traditional assets or what I call 'sexy' trades. Lumber may not be the most exciting sounding trade but if you look at the trend upwards and now the downtrend in play then it has given you plenty of opportunity if you were following trend following principles to go long and profit and now go short and profit. 

Add leverage into the bowl and you get a nice profit mixture.?

I am interested in what news-sources you follow to get the fundamental data that you use?

Trading index-futures such as the SP500 i use tradingeconomics.com, but haven't been able to find an equally matching source for commodities and their market indicators.

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I use Bloomberg Commodities, CNBC Commodities, etc. 

I use 'Google' and sources on the Internet where I think the publications and news is credible. 

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for news I like the reuters stuff which is in the platform. Note this isn't IG news which I quite like (no offence IG) but the stuff direct from RNS etc from Reuters themselves - you'll see the logo in the bottom left there. You can get a good load of stuff on weird and wonderful assets.

1993789174_IGTradingPlatform_SpreadBettingnewsarea.thumb.png.362f3aca259bed31f1801b3880c6a940.png

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7 minutes ago, TrendFollower said:

Is Lumber about to start its next big move downwards?

we're certainly at the key level or support not seen since 2017! Upwards of 40% pull back, and if it breaks ... bye bye :(

Lumber_20180831_17_01.thumb.png.3dc675969682a4dde9b87649d378d748.png

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8 hours ago, TrendFollower said:

 

How much do you pay for Eikon?
Is it much more convenient to have everything in one place compared to having it all scattered across sites on the web?

I use Bloomberg, Reuters, FT etc too, but I've always wondered exactly how much beneficial it is just to have a platform such as Eikon?

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@Zala,

You can get a free trial for Eikon Commodities from Thomas Reuters and I am sure if you contact them then they will quote you a price for your needs. I don't think it is right to share how much I pay on an open forum and nor do I feel that comfortable disclosing it but it is not cheap!

Yes, it is much more convenient to have everything in one place compared to having it all scattered across sites but I still browse the web and have a look at Bloomberg, CNBC, FT, etc. I have an FT premium subscription that I have had for many years now. What Thomas Reuters gives you is news faster than others. You may find that other news platforms purchase their news feeds from Thomas Reuters!

In terms of beneficial, it all depends on the how much you trade and the value of your trades and position sizes. If they are small then it may not make financial sense to pay for such a subscription. It is all relative to your personal trading needs.

From a trend following perspective if you follow price action and trade based on price action and volume then something like Sharescope is very good. I find it helps me to identify trends rather well especially for shares.

https://www.sharescope.co.uk

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