Top pick for the day - CRB Index

Which one to short now?

CRB Index (CRB) dropped below the 2009 low of 200.16 yesterday.

We think it may fall further as the LT downtrend from 473.90 high in 2008 is not over yet, in our view,

with the reasons being:
1) prices are still trading below the LT downtrend line, and

2) pullback from 2008 low stopped at the 62%FR of the 2008-2009 fall.

Usually, a failure to move above the said FR level would signal that the bear is still in control. Besides, the demand side of commodity is expected to slow down as the World Bank trimmed its global economic growth outlook for 2015 in June.

Therefore, look for lower prices in next couple of months, targeting 175 and 155 next.

The question is: which commodity in the CRB is the best one to trade on the short side? We think Natural Gas (NGA) (right chart) is the best choice for now as prices appear to be forming a continuation triangle pattern within the LT downtrend channel (red).

Aggressive traders may go long here with a stop placed above 2.951. Pushing below 2.706 would give us the confirmation that the next leg down is underway, targeting 1.90-2.00 next. (Read Report)

Source : CIMB Research