These Beaten-Down Shares Are Set up for a Strong Reversal

Agricultural commodity prices are bottoming.

It has been a rough year for sugar, wheat, corn, soybeans, and just about every other agricultural commodity.

[ad#Google Adsense 336×280-IA]The PowerShares DB Agriculture Fund (DBA) – which is a basket of commodities – is down 9% so far in 2013.

It’s down more than 20% from its peak last September.

But we’re now entering a seasonally strong period of the year for commodity prices.

And it looks like agricultural commodity prices could be set to run higher…

Take a look at the following chart of DBA…

In each of the past four years, DBA rallied from July into October. The strongest rally (29%) was when DBA bounced off extreme oversold conditions in 2010. The weakest rally (6%) happened when DBA was consolidating at a high level in 2011.

The conditions today look more like those from 2010. So I expect the seasonal strength in DBA this year to be strong. Take a look at this shorter-term chart…

DBA is bouncing off its down-trending support line. And there’s strong positive divergence on the MACD momentum indicator. So the chart is set up for a strong reversal higher as we enter this seasonally bullish period for commodity prices.

If DBA can break above the red resistance line at $25.35, it should quickly challenge the May high above $26. Beyond that level, it would hit resistance near $28 – where DBA started the year. That’s a 12% gain from where DBA closed [Wednesday].

And compared to the rallies over the past four years, it’s a reasonable expectation for this summer.

– Jeff Clark

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Source: The Growth Stock Wire