The commodities markets have been bouncing back for 3 months. After the huge plunge occurred last year due to massive deleveraging and soaring risk aversion. The CRB index lost 57% of its value when it sharply fell from an historical high of 474 points to a low of 200 points in 7 months (points A and B on the weekly chart).
The last price of the price action is 245 points, which means that the CRB index has already rebounded by 22.5% since the low of last February (point B). On the current levels the index may find some resistance. There is indeed a technical line that could prevent the price to go higher immediately. This long-term resistance line joins the lower highs posted in 1988, 1996 and 2003. The break of this resistance 6 years ago triggered a strong bullish signal and generated a massive move upward. It was the beginning of the commodities boom.
The index fell below this line in late November last year. Now the rebound has driven the index back to this previous resistance line. Despite it has been cleared in the past, it may become a new opportunity for traders to sell commodities.
On the daily chart, the Chande Momentum Oscillator (CMO) argues for a potential continuation of the current uptrend. The CMO can also be used to measure the degree to which a security is trending. The higher the CMO, the stronger the trend.
TH CMO has also not entered its overbought area (this is confirmed by the RSI) and no bearish divergence appears in the chart pattern.
The 30-day moving average has just reached the 100-day moving average. A crossover would confirm that a further momentum is possible and would drive the price above the resistance line. In this scenario the next targets could be the levels of 265 and 305 points, which are the 2 first retracement ratios of the decline occurred between points A and B.
