Hot Commodities?

Source: iQoncept /

News broke last Friday that the Federal Reserve might consider “pausing” rate hikes. The new tone emanating from the Central Bank mobilized bulls and sent stock prices higher in a hurry. Unfortunately, soft earnings news from Microsoft, Facebook, and Google put a damper on newly acquired enthusiasm.

While earnings could send the markets zigging and zagging despite a potential Fed pause, the dollar would likely weaken. Commodities are a likely beneficiary of a softer greenback and shouldn’t be swayed one way or another by good or bad earnings.

If we’ve made the correct call, then investors might consider commodities-based exchange-traded funds (ETFs) like Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC).

As you can see on the chart below, PDBC has converging trend lines which are about to collide. From experience, a powerful move usually follows once the underlying investment picks a side. For example, if PDBC moves above the top trendline, then the ETF could rally. Of course, the other side is true too. If PDBC falls below the bottom trendline, shares could test 52-week lows.

The ETF’s chart is dropping some hints as to which side might win. A recent bullish MACD crossover circled on the PDBC’s chart below is considered a technical buy signal. Putting it all together, a softer dollar, a technical buy signal, and a potential breakout puts Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF in line for a potential rally, in our opinion.

One other point of important note, PDBC does distribute income annually, usually in mid to late December. Make sure you keep that in mind.

Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC) is only appropriate for investors with an above-average risk tolerance as commodities prices can swing wildly.

A Bullish MACD crossover can be a positive for prices.

Rich Meyers
Investing Trends