1387% in Just One Week! And A Broad Commodity Sector Punch in the Nose! (DBC, QQQ)

Dear friends – Jews and Noahides all…

We’re just days from Tisha B’Av, our national day of mourning for the loss of our Holy Temple – and the Shechina – from the Land of Israel.

And we pray…

That Hashem restores His Dwelling Place to the height of its former glory, as it was in the days of Shlomo HaMelech.

May He also restore the line of David speedily in our days, and bring us our holy, righteous redeemer to rule in peace over Jerusalem and the entire Land of Israel.

!ונאמר אמן

Without it, the entire world may perish.

Now back to the mundane…

We’re trading the commodities today by way of the Invesco DB Commodity Tracking Fund (NYSE:DBC), an ETF slightly overweight the energy sector, but overall a decent proxy for the commodity class at large.

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But before we get there, we have to tend to a massive winner – earned in just a wee seven days!

That’s right; it’s our QQQ initiative from July 28^th.  The letter was called Quick and Dirty: Short Term Momentum in the High-Tech Realm.

Quick.

And dirty.

And lucrative.

Recall, that we urged you then to buy the QQQ September 16^th 316/321 CALL spread for $2.12 and sell the QQQ September 16^th 262 PUT for $2.18.  Total credit on the affair was $0.06.

We also recommended a STOP sell order on the stock at 262 to prevent any runaway loss.

And…

The CALL spread is now yielding a fat $3.06 (15.95/12.89), while the 262 PUT can be repurchased for $0.89.

Dump the first and buy back the second, and you NET $2.23 on exactly NOTHING spent.

Adjusted for minimal commissions gives you a freewheeling gain of 1387% in just a slap-happy SEVEN DAYS!

Remember to cancel that STOP.

And now we move on.

The commodities haven’t made a lot of sense for a long time.

Why?

Because they normally track the US Dollar – inversely.

Yet since December, 2020, the two have been rising in tandem, and we’ve been scratching our dandruff-ridden scalps trying to determine who the hell’s going to break lower first – and when.

And…

Well, friends, the time may now be at hand.

Have a look at the chart for DBC –

This is the daily chart for the last six months, and it shows –

1. Two huge overbought RSI readings in February and March (circled, in red) that led to divergence against price on both RSI and MACD indicators (green arrows).  Nothing demonstrates a loss of bullish momentum like the foregoing.
2. Volume has been diminishing for ten weeks (in black), also a sign of bearishness – “volume precedes price”.
3. Price-wise, we see the moving averages starting to roll lower (boxed, in red), with price beneath them both (in blue).  This is usually the start of a more protracted decine.
4. In addition, price appears to have abandoned the all-important 137 day moving average, and unless it can reclaim that line (by advancing to the $26.20 level), the next stop is support at $23 (in purple).
5. Beyond that, last support emerges at $21.

Now look at the weekly –

Here, we find more bad news for the bulls –

1. To begin, weekly RSI is now sub-waterline and MACD is fast approaching that level (in green).  When it gets there (which could be yet a week away), we’ll surely massive technical selling.
2. The sound of a seven-month rising trendline breaking (in red) was positively Krakatoan, and could be heard from Lisbon to Sao Paolo.  Price also began declining thereafter like an island melting in the south Atlantic.  In our view, a new, intermediate trend move was thereby signalled.
3. The weekly chart offers no serious support until the bunched moving averages in the $17-18 range.

And we say:

Let’s dance, fatso!

Like this –

A Jew and His Gold recommends you consider selling the DBC October 21^st 25/27 CALL spread* for a credit of $0.70. (1.40/0.70) and buying the DBC October 21^st 27 PUT for $2.40.  Total debit on the trade is $1.70.

[*Sell the 25 CALL and buy the 27 CALL.]

Rationale: maybe the best aspect of the trade is it’s only eight cents out-of-the-money (that’s a measly three tenths of one percent).

And from there, every penny lower is another dollar in your pocket.

Breakeven is $25.15.

Max gain (in the event that everything on the planet becomes worthless) is $25.15.

Max loss is $3.70 (difference between the CALL strikes plus the initial debit).

We figure that the most likely downside (in the time frame allotted) is anywhere between 23 and 21.

It’s a moving target, of course, but we’ll be looking to close as the stock moves toward those levels.

G-d bless the believing remnant.

And many happy returns!

Matt McAbby

Follow @HughLOHaynew