TWENTY YEAR LOWS

I once had a client who's commodity trading strategy was buy only ten and twenty year lows! It was a reckless touch of genius requiring generational patience. It worked with commodities because commodities generally don't go bankrupt.*

Nearby futures contract price per barrel. Source: Barchart.com

As I write, the active month May WTI Crude Oil futures contract is trading at $25.74 a barrel, down $20+ this month alone. The 10 year low WAS $26.05 made February 2016. The 20 year low for nearby crude oil is $17.12 from November 2001. Can crude oil fall another 33% to match its 20 year low?

Crude oil is not alone. It is joined by nine other commodities or commodity sectors of the 40 measured by the Bloomberg Commodity Index. These are: Crude Oil, Agriculture, Corn, Energy, Grains, Petroleum, Softs and Sugar. Four more components are at 10 year lows! Ten and twenty year lows tend to be rare but highly correlated. Commods like to rise and fall together.

Crude oil looks great at its $20 support level. But then again it took over ten years to rise from it.

*While commodities don't go bankrupt, they do become "delisted". Once delisted, owners of futures contracts are left to the whiles and enormous expenses of the physical market.

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Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors.