2021 Metals and Commodity Trade Ideas
Updated: Dec 25, 2020
First, I want to say Happy Holidays and Merry Christmas to all of you; 2020 was a challenging year for all of us and completely unprecedented.
This week started with a bang on December 21st, with silver having a $2.51/oz range and Platinum fluctuating $134.4/oz. One lesson I have learned in 2020 is that volatility can come out of nowhere and at any hour, day or night, and in any commodity. With futures trading nearly 23 hours a day, it might be wise to use resting good-'til-cancel orders to take advantage of these wild swings.
Planning forward, the first half of 2021 should continue to support several commodities on our radar, while the back half will give Gold a renewed lift. For those perma-bulls on gold/gold miners, it is not that Gold will not perform in the first half; it will just underperform other asset classes leaving those long scratching their heads asking why. Simply put, investor asset allocations are shifting towards higher growth, higher inflation trades with the focus around the new administration's policies with the possibility of the economy reopening. How do I know this? It is evident by the performance over the fourth quarter futures prices in several asset classes and individual commodities.
Digging into the details, the tier one top three performers are Lumber (+42%), Russell 2000 (+38%), and Heating oil (+32%), while tier two standouts are Platinum (+22%), Copper (+19%), Crude Oil (+18%) and Silver (+11%). Where is Gold, you might ask? Gold (unch) is following the other rate-sensitive products 10-Year Note (-1.22%) and the 30 Year Bond (-2.50%). What I believe will happen is that the tier two performers will catch up to the top performers while the 10-Year Treasury yields will continue to punch higher through 1% and ultimately up to 1.59% by mid-2021.
10-Year Yield Chart
There are two points to identify on this chart: the October 2018 high that marked the top in yields, and March 2020 low that did not retest in August and signaling the bottom in yields.
Gold Futures Chart
Conversely, there are two points to identify on this chart: the October 2018 low that marked the bottom in Gold and the August 2020 high that signaled Gold's top.
For some reason, and this being primarily a "bullish gold" website, I feel the need for justifying my reasons for not being a "perma-bull" on Gold but rather a "cycle-investor". Therefore when we see the cycle top in economic data and Treasury yields, I will join the masses again as a Gold bull or if it can string a series of "higher highs and lower lows" technically.
With time cutting short before I start a road trip to my parents for Christmas, I want to throw out some of our ideas we are putting to work. (apologies for grammar or not going into detail on each).
High Conviction trades for 2021:
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Long April Silver 29.50-35.00 call spreads
Long February Copper 360-365-368 call butterflies
Long March 10-Year Note 138-135 put spreads
Long February mini Crude Oil futures using a scale in approach at three and four-star support levels.
Long March Copper futures from three and four-star support levels
Short March U.S. Dollar futures against three and four-star resistance levels
Long January Platinum Futures
Long the March Micro Russell on a correction to three and four-star support levels
Long the March Canadian Dollar (it is a commodity currency that works inverse to the U.S. Dollar.)
Last note, the 2021 commodity calendars arrived at the office, so our marketing team built the labels and will send them out next week. If you did not request one, do so here as we purchased just a limited amount. *Available to U.S. residents only. You can request yours here: Blue Line Futures 2021 Pocket Calendar.
Good luck and good trading,
Chief Market Strategist
Blue Line Futures LLC
141 W. Jackson #2845
Chicago IL 60604
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.