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Strong Trend for Lumber

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The bottom may be in but it could also retest the 30,000 level. Let's wait and see and be ready to take a position when it all becomes clear.

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@draa46,

Yes it is quite possible that the bottom may be in but none of us simply know. It could retest the $30k level or possibly break below it. Time and price action will tell us the answer going forward.

Any rise in interest rates could pose a problem for Lumber prices increasing. With the US GDP Growth and unemployment figures giving the US Fed room to increase rates should such strong figures continue to be announced. 

The Lumber futures market is not known as a liquid market so for traders going both 'Long' and 'Short' remains full of high risk. In fact Lumber is most probably one of the most illiquid markets within Commodities.

What we have seen is an all time high followed by a brutal correction. For anyone who is a value investor or even a long term value trader then there is an opportunity to go 'Long' on Lumber. 

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Weakness in Lumber prices is potentially a warning indicator and 'Red Flag' for me in terms of economic activity.

Now it is no surprise that major US indices and indeed other major indices around the world have seen some downward price activity. 

Has Lumber bottomed? I do not know but any move upwards towards $40k may indicate that it has. However, if trouble strikes in the US and its economic activity begins to decline then we could see further downside to Lumber prices. This is not out of the question. 

 

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This could now be the turn around level but I have to agree there may be economic factors that develop to depress the price further.

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@draa46,

Yes, there was another bounce off the $31500 level. It seems there is a little bit of support there but whether it can hold I do not know.

Softwood lumber sales slow to a trickle as prices flounder

https://www.woodbusiness.ca/softwood-lumber-sales-slow-to-a-trickle-as-prices-flounder/

The price reacts and behaves for a reason. Once a trader understands the reason then it can help them make a decision on whether to enter a trade 'Long', 'Short' or stay on the sidelines and monitor the price action. 

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So it seems the $30k level is holding. We have seen what in my opinion is pretty common in Lumber is a large 1300 + points move upwards.

So roughly a £3.5k margin would have netted you around £1.3k in just one trading day. If you now add leverage into the mix and then one can see why Lumber is a very interesting proposition. Now if you are trading either daily or by holding in the direction of the trend over several months / year and you can see the level of profits which can be achieved. 

It is all about risk/reward and I accept the risk ratio to capital will not work for many or they simply will not be comfortable with it. This is fine as trading Lumber is not for everyone but it has been one of my favourite Commodity trades over the past few years. The trends are strong, last a long time and when adopting a trend following strategy the asset suits my style of trading and personality. 

I attached today's 'daily' chart for Lumber below:

Lumber_20190612_18_42.png.ad70404dee93587f24aee2b458ec1c1e.png

Now if the US were to lower the interest rates and it is a 'BIG IF' as we do not know for sure that they will then it could present a lit match under Lumber! 🧨 I know this is dynamite but I could find an emoji of a lit match but it will do. Lumber is a more illiquid market than other Commodities so one must understand this. In fact I would go as far to say that it is very illiquid. But in my experience some of the illiquid markets create the best trends to trade. 

If the US lower interest rates then Lumber price action could get very interesting.

 

 

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Lumber up another 1158 points at the time of writing this post just after 5:00 pm UK time. It hit $37763 today. It seems until the US interest rate situation is clarified then it may provide some support for Lumber with potential upside.

When Lumber was in its bull run then if you staked the minimum £1 per point with around £3k margin then you could get £1k in a day. Of course not all days as some days you could lose big as well but if you were trading in the direction of the overall trend then you would win such big amounts per day more times than now. Now if you increased your leverage then you can begin to see how much you could earn in profits per day. 

What we do not know is how much legs if any this recent lumber move has. I have a feeling it is based on the potential of the US reducing interest rates but this is not a given and so this trade becomes very high risk in an illiquid market.

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Lumber is up yet another 1000 points + today.

It hit one of James Bond's favourite price points of $39007!

Lumber is showing a very strong breakout and as a result the price has gone above its 20, 50, 100 and 200 DMA as seen in the chart below which I have attached.

Lumber_20190614_16_49.png.3df2a27670319491194548384daebd41.png

Now if the US Federal Reserve announce via the media that it will not be lowering US interest rates, this move could reverse and Lumber could head back downwards. However there is pressure for the US to increase its homebuilding programme and whilst US indices are travelling upwards then it should remain positive for Lumber. should US indices take a tumble which is very possible then Lumber could be joining them. It is worth keeping an eye on the price of Bonds and Gold to assess this scenario. 

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I have stated on possibly other threads that Lumber has been one of my best trades both on the 'Long' side and on the 'Short' side.

The US Fed are making noises about potentially reducing interest rates and this is providing a bullish backdrop for Lumber prices.

It is breaking out very strongly and sharply and hit $41008 today. See the 'daily' chart below.

Lumber_20190618_18_29.png.1ef1582b5b0c946cdd5790af30945284.png

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Fed leaves US interest rates unchanged. Lumber falls 1500 points!

The could be a fantastic short term trading opportunity here by going 'Short' Lumber as the speculators begin taking profits and also taking 'Short' positions themselves. 

Sometimes the best strategy can be to 'Ride Along with the Speculators'. 

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The directional call on Lumber is now tricky looking at the 'daily'. 

It is not clear to me (anyway) whether the downtrend will continue or an upward trend will form. One must closely follow the price action of Lumber to get a feel of the asset and to ensure one is in tune with the price movements.

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Lumber has snapped back up and is up over 1200 points at the time of writing this post. It actually hit $40965.80 earlier on. 

This week will be very interesting to see how Lumber's price action behaves. 

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16 minutes ago, TrendFollower said:

Lumber has snapped back up and is up over 1200 points at the time of writing this post. It actually hit $40965.80 earlier on. 

This week will be very interesting to see how Lumber's price action behaves. 

The price looks a few decimal places out, easily done, I think it's per Thousand Board Feet.

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I would not normally pay any attention to IG's Client Sentiment but thought I would have a look and it shows that 64% are short. This is not unusual as when looking at the 'daily' Lumber is still in a downtrend but only just. 36% are long. Also 11-50 of IG's clients have an open position in Lumber.

Now call me cynical but it could be just 11 clients rather than 50 clients. That is a big difference! If IG know that 64% are short and 36% are long then surely it must know exactly how many IG clients have an open position to get these percentages. Now IG may argue that this changes on a daily basis or an hourly basis, etc. That argument is irrelevant as then IG should and could not give definitive percentages and should use the same approach and state that 20% - 40% have a long position and 60% to 80% have short position. Now this does not cut it for me. 

The percentages provided will mean that it MUST be based on exact number of IG clients rather than a range of 11-50. You simply cannot get exact percentages based on a range such as 11-50. 

Like I said at the start of the post, I normally would not even look at the IG Client Sentiment section and I wish I had not. It is not for me. 

 

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Lumber seems to have found some support at slightly above 30000. It seems to be going through a volatile consolidation period. 

Lumber_20190721_09_48.png.3690128b08fcb51eae78c0fdb563438f.png

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Today I have taken a buy call in crude oil at 3882 and exited from the call 4:30 pm at 3860

Total Profit: 22

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The question is whether lower US interest rates will spur an increase in home building and thus leading to a greater demand for Lumber?

It seems to have found support above the 30000 level. 

Lumber_20190802_09_51.thumb.png.f645a7c4d4256b6ec52fb1f460f34d7e.png

I just wonder if we may begin to see the start of a new upward trend in Lumber prices. This is one to keep a close eye on. I think the shorting opportunity has finished for now. Anyone still short may want to consider liquidating their position. I would be more inclined to wait for a potential breakout on the upside with Lumber. 

What is interesting is that the price is above its 20, 50, 100 and 200 DMA on the 'daily'.

Lumber_20190802_09_53.thumb.png.a67986d5a1ad5d98d98e500a5ddc3c36.png

What concerns me is that the MA curves are not sloping upwards. As soon as they begin to slope upwards it is a clear and bullish indicator for me.

Lumber_20190802_09_54.thumb.png.3a71f6c2200202890029cc745f930026.png

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Lumber seems to be very volatile at the moment but in this volatility seems to be making 'higher highs' and 'lower lows'. It is just about managing this and it seems very choppy.

Lumber_20191007_18_59.png.599b26453bce2a94d1cdc0fabe3a4308.png

The price has also gone above its 20, 50, 100 and 200 DMA' on the 'daily'. 

Lumber_20191007_19_01.png.179bdc571a1cbcec8743669ea435707a.png

So now the question is will Lumber see a strong breakout to the upside? This will depend on US interest rates (the Fed) and housing demand. Data being released out of the US will be the key to Lumber's price action. 

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Fantastic price action for Lumber right now. It is up over 300 points alone today.

Lumber_20191028_16_40.png.49534d86c743b1cc89175e73a4ac28ca.png

It seems it has bottomed and consolidated and now for the next move upwards as 'Risk On' comes into action. Of course 'Risk Off' can rear its ugly head at any moment but if 44000 clears (Daily Timeframe) then we could see a strong bullish move.

 

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Lumber up a staggering 800 points plus and over 2% at the time of writing this post. 

It is breaking out. 

The housing market will be key for Lumber prices so you may wish to keep an eye out in that area. Previously a booming housing sector has been key to U.S. economic strength and this sent Lumber prices on a beautiful trend. 

If reports are to be believed then new house construction has been rising this year and this is helping hoist prices as builders need more Lumber. Now as most of you will know the US Federal Reserve has lowered interest rates this year. This resulted in mortgage rates falling. This allowed those looking to buy houses to borrow more at a lower cost. This as a result boosted demand for new housing.

Reports are suggesting that the US Federal Reserve is expected to lower rates further  to try and shore up the U.S. economy. If this is true and is the case then it is a move that could keep Lumber prices strong going forwards.

Lumber_20191101_17_47.png.ad685f318da4d73740be972e84f142bc.png

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Lumber_20191102_13_33.png.eaada19f950e045166da568d089dcc89.png

The Parabolic SAR is signalling a potential trend change. 

On the 'daily' the price is trading above the Parabolic SAR and therefore it is bullish for traders trading on the 'long' side or looking to initial a 'long' position. 

Whilst the risk of further lowering of US interest rates remains a potential then it should offer some support for any major drop in Lumber prices. 

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The 'RSI' (Relative Strength Index) is showing Lumber prices approaching overbought levels. Now that is what I want to see when a strong trend is trying to form. I know traders that look at this to try and go the opposite direction but that is a risk when it comes to Commodities like Lumber and especially Natural Gas. 

Lumber_20191104_18_16.png.547e9baf27da7f18dd98b489e343224b.png

I would like to see Lumber surpass 46000 and move towards 50000. It is capable of doing this but patience is required. It can be extremely volatile when it wants to be. 

The one thing to remember is that US elections are coming in 2020 and the Trump will want to show that houses are being built and that the US economy is strong and is progressing. I think the background narrative could become a positive backdrop for Lumber prices over the next few months in the build up to US elections. This is just a hunch and 'gut' feeling so please do not take this as gospel. I am merely sharing my inner thoughts. The price action will confirm or reject my inner thoughts. 

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When you look Lumber on the 'daily' you can see how choppy it is. The volatility would take stop losses out if the stop losses were too tight. 

It is trying to stay above the 40000 area but no able to at present. 

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I think Lumber will attempt the 43000 level. Of course supply and demand fundamentals will be key to whether Lumber does reach such a level again. 

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