Mechelany Advisors’ Investment Ideas are here to make our readers make profitable investments over different time-horizons. Our value oriented investment management style and research focuses on cheap companies with great and solid businesses to be held as core holdings in portfolios. We provide individual Investment ideas based on our multi-layered screening and valuation process combining structural, top-down macro, sectoral analysis, bottom-up stock selection and valuation analysis. Our Investment Ideas may be included in our Model Portfolio while some may not be included if they do not fit the global risk profile and asset allocation chosen at the time of selection.
Trading commodities can add significant value
Commodities in general and soft commodities in particular are an asset class that is driven by sharp fluctuations as physical supply and demand disequilibrium are frequent, due to weather conditions, and are often amplified by speculation.
On May, 19th 2019, we were recommending to diversify Portfolios into SOFT COMMODITIES, making the case that they would start a new secular rally – See BUY SOFT COMMODITIES –
Since we timed the bottom of the cycle, we have been treading them actively, generating significant profits to our Model Portfolio.
In June 20th 2018, in a post titled TREES DON’T RISE TO THE SKIES, we recommended to Short Lumber after a phenomenal rally. There again, we made great returns shorting Lumber at 600 and buying them back towards 350
Today, Soft commodities are in the last phase of a mania and we are shorting them again in our Model Portfolio and advise our readers to bail out of the space if they are invested there
Since the March 2020 bottom, soft commodities and lumber have gone through the roof, and we have now reached a stage of over-extension that denotes a a clearly exhaustive blowoff move.
Granted, the COVID-19 lockdowns have had a great impact on house renovation and construction, triggering significant demand for the basic material of construction.
However, the price of Lumber has jumped from 251 on April 4th 2020 to 1420.50 today, a massive 565 % rally that has nothing to do with final demand.
Lumber rallied an amazing 71% from its March 2021 bottom, a move that is clearly exhaustive and just comparable with the move we saw from July into August last year, followed by a nasty correction.
More importantly, Lumber is trading in an obvious minor wave 5, in the ultimate endgame of its March rally and a near-term top/reversal should be not far with a major correction ahead
SELL SHORT iShares GLOBAL TIMBER ETF
WOOD US @ 93.5
To short Lumber, we use this US-listed ETF which tracks the price of Lumber with a high correlation.
Since March 2020, CORN has risen from 300 to 703 and is showing the same signs of exhaustion Lumber is showing. Speculative positions are at record highs and a significant top is in the making.
SELL SHORT Wisdomtree CORN 2X Lev
LCOR LN @ 3.024
To Short Corn, we have been shorting the WisdomTree CORN 2x Leveraged ETF LCOR LN
Soybeans have been rising from 780 in March 2020 to 1600 yesterday, marking a major top after an exhaustion rally.
To short Soybeans, we are shorting the Wisdomtree Soybean Oil ETF SOYO LN
SELL SHORT Wisdomtree SOYBEAN
SOYO LN @ 6.21
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