Short Commodity ETFs — Part 3: The boat is starting to sink

Global commodity prices, led by grain products, have only begun their bear trend

This is my third posting on a strategy to short global commodity prices using stock ETFs. See my June 13 post here and my June 15 post here.

Per $100,000 of trading capital, I am presently short 400 shares of $DYY with a protective stop at $11.53. I will short another 200 shares at $10.14 stop. Upon the completion of the H&S top, the target will become $7.15.

Today I shorted 600 shares of $RJA (the agricultural ETF linked to the Rogers fund) at 10.18. My risk is to 10.51. The target for the trade is $8.64.

The next piece to this trade is a buy stop for 100 shares of $CMD (the ProShares Ultra Short Commodity ETF) at $52.01. My risk on this trade, if filled, would be $49.19. The target would be $68.00.

The final piece to this campaign is to short 100 shares of $DJP, the iPath DJ Commodity ETF at $46.98 stop. The initial stop would be at $48,51 with a target of $41.76.

I believe that global raw material prices are in a major topping process and that the reward to risk relationship of building a short campaign is very favorable. In fact, if all the pieces of this puzzle come together, my highest absolute risk will be 47 basis points (about 1/2 of 1%). The profit potential for the entire campaign if the targets are reached will be 536 basis points, or a gain of 5.4%. So, I am risking 47 basis points to make 536 basis points. I will take these trades any day of the week.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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