My chart idea illustrates a confluence of fundamental and technical analysis which leads me to believe a long trade in the Lumber futures market may getting close.
On the fundamental side:
- We have seen Commercial buyers become net long for a whole month, last time this happened was mid 2020 and this then led to a ~130% price rise over 2 months when the price went from roughly $350 up to $820, albeit it was a bumpy ride with numerous gaps up and down along the way. This recent commercial buying activity is shown with the blue above the zero line in the COT report indicator.
On the technical side:
- There is clear bullish divergence on the daily chart between price and the RSI.
Key technical levels to watch:
- Volume profile going back almost 1yr (as much as I could fit onto daily chart) shows the biggest volume cluster / Point of Control sits around $620, so price needs to break above this and hold the level to confirm break of down trend.
- Coincidently the above mentioned level measures up almost precisely ($618) with a Fibonacci level when using the recent double top as anchor points.
- When drawing a simple trend resistance line from the recent high in march and down to current price then you can see that this trend has not been broken yet, however the line recently intersected $620 level. If price breaks the trend then the $620 level shouldn't be far off.
- Lastly on the weekly chart price is just touching oversold levels in the RSI. Historically Lumber hasn't prolonged periods at this level, it typically touches or breaks the level and reverses back within a few weeks.
In summary it looks like ~$620 is a key level that needs to be broken above and if it can hold that level until weeks end then I'd be looking to position a long entry.
The Lumber futures market does offer big reward when it moves however it is very illiquid with tendency to price gap once it starts trending so caution needs to be exercised!
On the fundamental side:
- We have seen Commercial buyers become net long for a whole month, last time this happened was mid 2020 and this then led to a ~130% price rise over 2 months when the price went from roughly $350 up to $820, albeit it was a bumpy ride with numerous gaps up and down along the way. This recent commercial buying activity is shown with the blue above the zero line in the COT report indicator.
On the technical side:
- There is clear bullish divergence on the daily chart between price and the RSI.
Key technical levels to watch:
- Volume profile going back almost 1yr (as much as I could fit onto daily chart) shows the biggest volume cluster / Point of Control sits around $620, so price needs to break above this and hold the level to confirm break of down trend.
- Coincidently the above mentioned level measures up almost precisely ($618) with a Fibonacci level when using the recent double top as anchor points.
- When drawing a simple trend resistance line from the recent high in march and down to current price then you can see that this trend has not been broken yet, however the line recently intersected $620 level. If price breaks the trend then the $620 level shouldn't be far off.
- Lastly on the weekly chart price is just touching oversold levels in the RSI. Historically Lumber hasn't prolonged periods at this level, it typically touches or breaks the level and reverses back within a few weeks.
In summary it looks like ~$620 is a key level that needs to be broken above and if it can hold that level until weeks end then I'd be looking to position a long entry.
The Lumber futures market does offer big reward when it moves however it is very illiquid with tendency to price gap once it starts trending so caution needs to be exercised!