The bulls are still in the driver’s at home as evidenced by the S&P 500′s continued ascent into all-time highs territory. The latest rate cuts unveiled by the European Central Bank at the start of June helped to re-inspire confidence surrounding the anemic recovery taking place in the currency bloc; bullish sentiment was further fueled on 6/19 after the Federal Reserve maintained its own accommodative stance [for more commodity futures news and analysis subscribe to our free newsletter].
Rising stock prices and falling volatility levels remain the dominant themes on Wall Street despite looming risks. The single biggest threat for the bulls now appears to be rising geopolitical tensions in Iraq. Adding to the list of risks is the upcoming Fed minutes release on 7/9; there is a possibility that the latest minutes will reveal a growing dissent among policymakers with regards to changes in forward guidance. If the minutes reveal that inflation is a bigger threat than previously assumed, precious metals could continue their run higher as profit-taking pressures potentially hit equity markets.
In light of the continued bull run, below we highlight two commodity stocks that may offer an attractive short selling opportunity for those looking to bet against some of the stellar run-ups already seen across Wall Street.
The stocks included here are deemed to be great trading candidates for three reasons. First and foremost, each of these companies boasts a market cap upwards of $1 billion along with average daily trading volumes topping the $1 million mark, in an effort to weed out smaller, more volatile, trading prospects.
Second, these securities are trading below their 200-day moving averages, thereby implying that they are in longer-term downtrends. Lastly, these stocks are also trading above their five-day moving averages, which makes them attractive for swing traders looking to sell short before they resume their downtrend. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques [see How To Lose Money Investing In Commodities].
Fibria Celulose S.A. (FBR)
Consider FBR’s one-year daily performance chart below.
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This stock has traded lower within a crudely-defined channel (red lines) since peaking just above $13 a share in mid-November of 2013. The recent rebound off the May 2014 lows is by all means encouraging; however, when you consider the longer-term trend at hand, it actually appears that FBR might soon be due for a pullback as it nears the upper-resistance boundary of its trading channel around $10.50 a share. Given that this stock is approaching a resistance level, we feel that a short position makes sense; be sure to set a tight stop-loss between $11-$10.50 in case there is a bullish breakout over the coming days.
Teck Resources (TCK)
Consider TCK’s one-year daily performance chart below.
Click to Enlarge
This stock has been drifting lower since peaking at $30 a share in late October of last year; since then, shares of TCK have sunk below their 200-day moving average (yellow line) and have even gone onto stage several failed attempts at re-conquering it. Most recently, this stock had three failed attempts at hurdling over the $24 mark, as seen in early April, and three more times throughout the month of May. Given that TCK is approaching its upper-resistance boundary, we feel that a short position makes sense; be sure to utilize a tight stop-loss between $23-$24 a share in case the longer-term downtrend reverses unexpectedly.
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Disclosure: No positions at time of writing
