Jun 02, 2022
The trend of sideways movements has begun to take over global markets for finance. Chart patterns that show top market players in the major sectors like technology and biotech are being cited by many as evidence to suggest that market trends are now over. But one sector that appears to be reversing this notion is the timber businesses worldwide. In this article, we review the chart and attempt to find out the best 3 Ways to Trade a Rise in Timber Stocks.
Weyerhaeuser is among the largest private landowners of timberlands and owns almost 13 million acres across the United States. Like the ETF previously mentioned, the RSI was recently moving into overbought territory and suggested that the current surge in momentum may begin to lose its vigor. Indeed, Monday's 2.06 percentage decline resulted in the RSI dropping below 70, which indicates that traders are watching for a continuation of the pullback. Many traders will be waiting for a buying opportunity close to one of the longer-term support levels.
One of the top holdings that the above shares in common is Weyerhaeuser. If you're not aware, Weyerhaeuser has been in business for over 100 years and is one of the biggest private landowners across the United States. If you look at the graph below, you will observe that the price has recently retreated from the 200-day moving mean, and the momentum that accompanies it is closing above a crucial trendline.
Although the earlier attempt to break the resistance of $36 was unsuccessful for a couple of hours of trading, this current breakout and subsequent test of the trendline indicates that this time this is the right move and could act as the catalyst for a sustained upward trend. Market participants will likely set their stops lower than the trendline ascending or the 200-day moving averages that are currently trading at $34.
In order to lessen their exposure to the 25 firms that make up the WOOD ETF, investors may want to consider purchasing PowerShares MSCI Global Timber Portfolio. CUT, like WOOD ETF, has a worldwide focus, but it consists of 73 holdings. In the same way that companies make decisions based on cost ratios, the most suitable allocation is determined by the specifics.
If you look at the chart, you will observe that the fund trades on a similar trendline as shown in this chart. Investors are likely to employ an identical strategy to the one previously mentioned. Based on their risk tolerance, the majority will be looking to protect their long-term positions by placing limits below trend lines or below the 200-day moving mean.
The RSI is among traders' most widely used tools to determine if assets are "overbought." The readings above 70 are the most well-known for determining the moment when momentum has waned and may be losing steam. Traders usually look for a drop below 70 in order to result in a decline. Therefore, some will sell and try to buy back when the price is at an even more profitable level.
In this instance, traders are likely to watch for a possible pullback to the support provided by the 50-day moving mean and ascending trendline. These two levels have provided buy points of strategic importance over the last few years. Technical traders will expect this trend to remain unless prices reach many consecutive closes below $31.72.
The most frequently watched ETFs that trade on exchanges (ETFs) by investors who want to be exposed to the world's timber and forestry market is the iShares Global Timber and Forestry ETF. In particular, as the name implies, the fund includes companies from all over the globe who produce wood products, agriculture products, and paper and packaging items.
Fundamentally, the ETF has net assets above $550 million, with an annual expense of 0.51 percent. If you look at the chart, you will observe it is trading in line with an established trendline, and it has been consistent with each pullback attempt. This is the kind of behavior that active traders expect to see continue. Many traders are likely to seek to limit their losses by putting stops at or below $78.94 or the dotted trendline, based on their risk tolerance.
The forestry and timber industries are frequently overlooked due to their nature as businesses. But with the fluctuating trend that has been dominant in the stock market, this might be a good idea to focus your attention on the stability of soft commodities.