Commodities Essential - April 19, 2011

Heavy Metals: 

China Outlook Weighs on Base Metals Prices

 Plus: Placing an order to add BOM on a stop!

We at Black Swan Capital have for a long time been presenting the case for a Chinese harder-than-expected landing … if not a major collapse. As the events of 2008 have moved further and further out of sight, however, China has been able to keep the music playing. And we know that growth has been among the two main reasons (the other being Fed quantitative easing) driving commodity prices higher. But consider what higher commodity prices mean for China:

Commodities Essential. 19 April 2011


 Last week I made you aware of BOM (PowerShares DB Base Metals Double Short ETN) as a way to play for near-term disappointment in Chinese growth and declining metals prices. I think now is a good time to place an order that will get us this exposure when the market turns sour. I want to enter with momentum at our back. Thus, use a stop-in entry on

 BOM (Last Price: $10.26)

  •  Buy shares of PowerShares DB Base Metals Double Short ETN, symbol BOM, at $10.60, STOP. If and only if this order is filled, then place an order to sell all shares of PowerShares DB Base Metals Double Short ETN, symbol BOM, at $9.80, STOP. Both of these orders are good till cancelled.

 Note about the stop-in entry: I only recommend entering BOM if it hits $10.60. Currently that is above the market price and is why we are using a STOP order to enter this position. If we are filled on this order then I suggest placing a stop-loss order at $9.80, as usual.