Commodities Essential - May 31, 2011

Alert: Going with the grain … 

Add JJG now; adjust stop-loss on SLV 

Wheat prices have been slammed today after Russia lifted a wheat export ban. Naturally, the news of additional available supplies have help relieve the upward pressure on price from recent news of adverse weather dominating the price action. 

I particularly think today will be one-and-done on wheat’s downside … at least as far as the Russia news is the primary driver; I think the supply situation will remain thin without some notably beneficial weather. 

I want to take this opportunity to add back some exposure to the entire grains complex — wheat, corn and soybeans — via the iPath DJ-UBS Grains Total Return Fund (symbol JJG).  

Let’s put out an order to add JJG now. 



 Trade Essentials.

 JJG(Last Price: $54.00) 

 Buy shares of iPath DJ-UBS Grains Total Return Fund, symbol JJG, at the market. Then place an order to SELL ALL your shares of iPath DJ-UBS Gains Total Return Fund, symbol JJG, at $51.00, STOP. This order is good till cancelled.

Notice the suggested stop-loss level is relatively tight. I believe JJG is now sitting on good, daily technical support; and I believe the entire commodities complex seems to have re-found its footing. But the list of global macro fundamental risks remain; and should investor sentiment shift, the grains will be vulnerable to downside despite their bullish supply-demand backdrop.

 Also, let’s adjust our stop-loss level on SLV, which has moved nicely in our favor and is currently up about 8% from where we entered. Silver prices have yet to retake the peak of their bounce after the sharp early-May sell-off. Silver is very near this resistance. Watching price action closely at this level …

SLV (Last Price: $37.31)

Cancel and replace your order to SELL ALL your shares of iShares Silver Trust, symbol SLV, at $31.00, STOP; NEW PRICE: 33.00, STOP. This order is good till cancelled.