Watchlist Update: $DBA $FXI $TMF $FXE



1. Invesco Agriculture ETF $DBA, close $22.24


I still think that now buying and holding stocks, whether growth or value, for a long-term portfolio, is currently absurd. Definitely. It would only be justified to hold them for short entries, or for swing/day trades, no more. There are few real long opportunities in a bearish market, even more so with a sure upcoming US (and world) recession, in which earnings and sales will clearly be reduced. When the market reaches a clear recognizable bottom (SP500 3500?), will be time to restructure a long portfolio again. In the meantime, I feel comfortable in risk-off mode.

That is why I try to look for specific niches in the market that can do well in this environment, just for swing or short-term trades. One that stands to benefit from the much-talked-about upcoming global food shortage is agriculture. If this threat occurs, which is very likely given the global supply chain crisis and the already extensive war in Ukraine, its products will see their prices rise due to high demand and low supply. This is how I have been holding the ETF $DBAriding the trend for months. This food ETF follows key products such as wheat, corn coffee, sugar, and soybean, among others. 

Technically, is showing a strongly bullish chart throughout the pandemic, with its price supported on the (red) uptrend line, with strong volume and RSI not yet in the overbought zone, where it can stay for a while longer, all the way to testing its 9-year resistance at $29. To take action on this, I wait for a pullback and the latest inflation data.

2. iShares China Large-Cap $FXI, close $30.42


China is once again an attractive place for the trader, not only because last week Shanghai finished Covid lockdown, but mainly since its central bank, unlike its world's pairs, has begun to apply a stimulus to wake up its falling growth, bad economic and real-estate results, supply chain crisis, etc. Last week they made an unexpected rate-cut, which in turn moved his stock market up to 3%. 

Thus, $FXI, the ETF that tracks its large-cap companies, now rebounding in its 6-year support at $28, seems an opportunity. This week needs to break the 3-month (purple) downtrend line and DMA50 with a bullish momentum candlestick to confirm a textbook reversal. Its next step would be arriving to $34, another key resistance. Interesting for a swing trade.




3. Direxion Treasury Bull 3X $TMF, close $13.97


US dollar has had a parabolic rise this year, justified in the now hawkish tone of the Fed and the expected rise in the 10-year bond yield. However, as is inevitable, it seems to have reached its peak and needs to already have consolidation and a correction to previous levels. In its weekly chart (not shown), a bear engulfing candle shows that probable trend change... and a move to its Fibonacci 38.2%?

So in the short-term, there are opportunities in products that depend on the US dollar. And is happening in bonds, as I indicated in a previous post. The /ZN future, which tracks the benchmark 10-y US T-Bond, reached its powerful support at $117 that held it for 12 years. This week it must break the structure and the DMA50, both at $120.2 to confirm the rebound. If this happens, it would be an excellent sign, and as I don't trade futures, I would refer to the bullish bond ETF 3X $TMF (not shown) at its $14 level for a swing trade, waiting for a downtrend line break with confirmation candles (chart not shown). A "risky" trade, more than with the less-volatile $TLT, but with good chances of success. 


4. Invesco Currency Euro $FXE, close $97.75


In this same idea of weakness in the short-term of the dollar, I can take advantage of the fact that the euro may soon receive a boost from the ECB, the European Central Bank through its next rate-hike, so its time to review the pair that links them: EUR/USD.

Last week this pair touched and bounced off its strong support at 1.04 showing a powerful reversal engulfing candlestick on its weekly chart. Now is near 1.06 a structure break level, which if overcome can send it to 1.07, its year resistance. Also, an inverse head n' shoulder pattern is forming in its 4-h chart. As I don't trade forex, I refer to the ETF that follows the euro, $FXE (not shown) to try a bullish swing trade and wait for the price action at that levels.

Good trading,
@BravoTrader

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