Globally, the agriculture segment of the markets, including companies and underlying commodities, has been one of the areas that many bullish traders have chosen to avoid. The imbalances between supply and demand have fueled major downtrends over the past several years, but recent price action is suggesting that the story is changing and that a reversal is under way. In this article, we'll take a look at three agriculture-focused exchange-traded funds (ETFs) to determine how followers of technical analysis will be looking to trade the move.
Invesco DB Agriculture Fund (DBA)
Active traders often look to broad sector-level ETFs to gather clues about the market's future direction. Taking a look at the Invesco DB Agriculture Fund (DBA), you can see that the fund has been trading within a defined channel pattern since July 2018. The period of consolidation is regarded as a shift between the bears and the bulls and is often used as a base for major trend reversals. In this case, the strong support near $16.65 and the climb above the interim level of resistance shown by the dotted line suggests that the bulls are gaining conviction. Long-term bulls will want to remain patient and buy on a close above the upper trendline because this would be regarded as technical confirmation of a trendline reversal and would likely be followed by a flood of buy orders.
ELEMENTS Roger International Commodity Index – Agriculture Total Return ETN (RJA)
Active traders who want to gain insight into the direction of specific segments of agriculture such as crops often turn to niche products such as the ELEMENTS Roger International Commodity Index – Agriculture Total Return ETN (RJA). Fundamentally, the fund comprises holdings in commodities including corn, wheat, coffee, cocoa, rice, oats, sugar and soybean meal. Taking a look at the chart, you can see that the price has recently closed above the resistance of an influential descending trendline, as shown by the blue circle. Technically, this price action is regarded as bullish and could be used as a catalyst by short-term traders that will send the price higher over the coming weeks. Stop-loss orders will likely be placed below the trendline in case of a major pullback, and target prices will likely be placed above the October highs near $6.
VanEck Vectors Agribusiness ETF (MOO)
The last agriculture ETF that traders will likely take note of is the VanEck Vectors Agribusiness ETF (MOO). As you can see in the chart below, the price has recently been able to close above the resistance of its 200-day exponential moving average. This popular technical indicator is often looked to by both retail and institutional investors for clues into the direction of the long-term trend. Given the recent breakout, it wouldn't be surprising to see many traders readjust their targets to the 52-week high of $66.64.
The Bottom Line
Agriculture investors have been handed their share of selling pressure over the past couple of years. However, recent price action of popular exchange-traded products is suggesting that the tide is turning and that rising prices could be in the cards for the weeks and months to come.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.