Commodity markets could be in the process of staging a major trend reversal, and those who use technical analysis could be poised to make a serious profit. In the article below we’ll take a look at several key charts and identify the major pivot points that one should watch as confirmation of a long-term move higher. (For a quick refresher, check out: An Overview Of Commodities Trading.)

PowerShares DB Commodity Index

When it comes to measuring the performance of the broad commodity markets, many active traders turn to the PowerShares DB Commodity Index (DBC). In case you are unfamiliar, DBC fund managers seek to track the changes of a diversified commodity index that is comprised of futures contracts on 14 of the most heavily traded and important physical commodities in the world. Taking a look at the chart below, you’ll notice that the 50-day moving average has recently moved above the 200-day moving average (shown by the blue circle). This bullish crossover is one of the most common long-term buy signals and is used by active traders to mark the beginning of an extended uptrend. Concerning risk management, traders will likely use the moving averages or the ascending trendline as guides for placing their stop-loss orders. (For related reading, see: Trade The Rise In Agriculture Commodities.)

Coffee

Commodity investors know the underlying price of coffee has been stuck trading in a downtrend since late 2014. There have been few signals of a trend reversal, and each successive rally has been met and then countered by the bears. Luckily for the bull, it seems like this story has now changed and for the first time in months, the chart is pointing to a move higher. As you can see from the chart of the iPath Bloomberg Coffee Subindex Total Return Index ETN (JO), which is a common barometer for the spot price of coffee, you’ll notice that the price closed above the 200-day moving average for the first time in several years. This bullish price action suggests that the bulls are taking control of the momentum, and the sharp increase in volume suggests that the breakout is valid. Aside from volume, active traders will also use the bullish crossover between the MACD indicator and its signal line to confirm the uptake in momentum. (For more on this topic, see: Unique Ways To Profit From Coffee.)

Newmont Mining Corporation

Aside from investing directly in the volatility of underlying commodities, it could prove strategic for investors to buy shares in mining-related assets. One group of specific interest could be large-scale mining companies such as Newmont Mining Corporation (NEM). Taking a look at the chart, you can see that the stock has been on a strong trek higher since the 200-day moving average crossed above the 50-day moving average back in February. Based on the strength of the trend and the bullish crossover between the MACD and its signal line traders wouldn’t expect to see this trend to reverse anytime soon. Specifically, traders will likely continue to hold a bullish outlook on the stock until the price closes below the support of the lower trendline or its 200-day moving average depending on their risk tolerance. (For more, see: A Beginner's Guide To Mining Stocks.)

The Bottom Line

Commodities have some of the strongest chart patterns found anywhere in the public markets. Diversified and niche funds are showing signs of long-term trend reversals for the first time in several years. Even large-scale mining companies are trading within strengthening uptrends, which suggests now could be the time to buy. (For more, see: Top 3 Commodity ETFs.)