Saturday 18 May 2013

Short Natural Gas, Long Crude Oil: Says COT Data

I'm getting short natural gas and long crude oil. Those are my two signals taking effect on next week's open of trading based on the latest Commitments of Traders data from the U.S. Commodity Futures Trading Commission.

See my latest signals table for more details on trader positioning in these and the other markets I trade using the free weekly COT data.

In natural gas, large speculator firms and small traders both have accumulated highly bearish positioning in their futures and options total open interest. My backtesting suggests it's best to trade alongside these two trader groups in natural gas.

Note that most other watchers of the COT data say you should always trade opposite to the large specs and small traders - often called the "dumb money." But these tend to be people who've never actually tested the data properly!

In crude oil, the large specs (whom I do fade in this market) and small traders (whom I follow) are both now lined up to give me a bullish signal.

In silver, my bullish position has hit its stop as the price of silver has dropped. My usual practice when a position is stopped out is to consider a trade in the opposite direction, a little trick I learned from Stephen Vita's excellent Alchemy of Trading website.

Have a good long weekend, Canadian readers, and good luck to all next week.

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