Time To Buy The Agriculture ETF? [PowerShares DB Agriculture Fund(NYSEARCA:DBA)]

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February 6, 2014 3:15pm NYSE:DBA NYSE:JO

buy-and-holdMorpheus Trading: Agriculture ETFs are heating up, led by an explosive move in Coffee (NYSEARCA:JO), while Cocoa (NYSEARCA:NIB) is at new 52-week highs after several weeks of basing action (though it doesn’t trade much volume).

Powershares DB Agriculture Fund (NYSEARCA:DBA), which has about 11% exposure to Coffee and Cocoa, has also made an impressive move off the lows, breaking through the 40-week moving average on big volume:

$DBA bottom fishing

Presently, $DBA is too far extended for a low-risk entry point, but we will continue to monitor the action as we wait for a 4-5 base to form above the 40-week moving average.

We’d also like to see the 10-week moving average climb above the 40-week moving average, and for the 40-week moving average to turn up.

The longer-term monthly chart below shows that $DBA could possibly stall out above $26, as there is resistance from a prior swing low and a weekly downtrend line. The ideal price action over the next several weeks is for $DBA to break the downtrend line on heavy volume, then base out for several weeks above $26 (forming a “bull flag” like pattern on the weekly chart):


As with our current position in US Natural Gas Fund (NYSEARCA:UNG), one great benefit of $DBA is its lack of correlation to the main stock market indexes (because it is a commodity ETF). In weaker markets, ETFs really shine because of the ability to look for steady trends outside of the stock market trend.

Again, its much too early to enter $DBA, but it is certainly one to watch. As always, we will be promptly alerted of our exact entry, stop, and target prices if/when $DBA meets our entry criteria.

Natural Gas ETF (NYSEARCA:UNG) stalled out at the prior highs, failing to clear $27, for the third time in 6 sessions. The stalling action should lead to a few weeks of consolidation above $23, which would allow the 20-day EMA to catch up. A test of the $23.50-$24.00 level may provide us with another chance to add to the position on weakness:


Presently, $UNG is showing an unrealized gain of 6.7% since our January 30 entry, and we will continue monitoring the price action for a potential entry point to add to the existing position.

This article is brought to you courtesy of Morpheus Trading, LLC.

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