When trading multi-bar visual price patterns, big moves do not come with a surprise! The patterns can be spotted well in advance and the potential for a possible big price increase can be identified before it occurs.
Such a big move has occurred over the last two years in commodities. Unfortunately, most people remain confused and overwhelmed. They just do not understand what is going on—their eyes are glued to the local gas station price label hoping for things to go down soon.
Let’s get a general idea and have a look at the famous Commodities Index, the CRB (Commodity Research Bureau Index). It represents a basket of 19 commodities from various asset classes. It acts as a good indicator of the overall global commodity markets.
After the strong sell-off in March 2020 marking the Corona Panic Low, we can clearly see a strong price advance that more than tripled the prices of the overall CRB Index. In a very short time, prices rose from around 100 to well above 300 Index points. That is an amazing price advance for an Index and the big question is:
Is this just a single one-leg move or the start of a much bigger price advance?
We strongly believe it is the start of a multi-year commodity bull—the start of the Commodities Super Cycle.
The CRB price chart above clearly shows a bullish multi-bar price pattern spanning over a 20-year period. The pattern starts to form in the year 2001 and consolidates sideways on a horizontal Base for about 20 years (see green line). The last requirement to complete this pattern came in March 2020 (Corona Panic Low) when a big volatile price bar was plotted—the Test Bar.
This is a pattern that has accumulated a lot of energy during its consolidation phase waiting to get released when all things – the rules – came together. The good thing is, we know what these patterns look like, how they behave, what the price target is and over what time period the target should be achieved. Analyzing a pattern provides perspective and allows us to identify when bigger price advances – like the one we have just seen – should occur (stop-run move). With the above CRB pattern, our target is the 2,000 Index level to be met over the next 10 years.
Note, most traders do not know about price patterns and, in the beginning, they have difficulties recognizing them even when shown. This is a bit like reading footprints on the ground. When you do not know about them, then they remain unseen to your eyes though you walk right on them.
Actually, the initial strong green move in the CRB (see bold green arrow) did not come as a surprise. Some of the compressed energy got released once the last highs (stop-run levels) had been broken. Current price is right at the 2nd stop-run level now. Most likely after some pullback down, you can expect another strong leg higher towards the target area.
The above pattern represents a standard, plain vanilla S1 Futures Gecko pattern on the quarterly chart. We know this pattern very well from any other timeframe we trade. The markets being fractal, this pattern looks, behaves, and develops in the same way over and over again.
Let’s have a look now at some more patterns of individual commodities forming part of the CRB Index:
Silver (SI) with an S1 Gecko Pattern (Quarterly Chart):
Silver made its first strong move, nearly tripling in price, from its low of $12.5 within only five months. A strong test bar down leads to a strong counter-reaction in the opposite direction (up). After this first stop-run move breaking the last lower high (SRL), prices have pulled back and might be ready for a second-leg higher soon.
Target: around $250 (x13 from current prices).
Note, targets are being determined by using a log chart.
Gold (GC) front-running well before CRB in June 2019 with an S2 Turtle pattern (Monthly chart):
Gold initiated a very early buy signal in June 2019 (around $1500) well before the CRB pattern was complete. This pattern is a standard, rounded-shaped S2 Turtle Futures pattern. It is known for producing very big price advances. Here, the most impressive price advances are still to come when the consolidation high ($2000) should be broken.
Target: around $10,000 (x6 from current prices).
Heating Oil (HO) with an S1 Gecko Pattern (Quarterly Chart):
Heating Oil put in a breadth-taking price advance that surprised many market actors. Within only one quarterly bar (see big green bar), the price activity of the last 18 years was cleared. The consolidation high from back in 2008 was broken. Breaking to a new high is a sign of strong bullishness. No further upper price resistance holds on from here on. Being well overextended long right now, a pullback is overdue. This should allow for short opportunities in lower timeframes.
Target: around $10 (x3 from current prices).
Palladium (PA) in Early Stage of S1 Gecko Pattern to Develop (Monthly Chart):
Palladium was the first commodity to put in extreme price advances between 2016 and 2020. During this time, PA more than 6-folded in price and we were able to capitalize on this move in lower timeframes. This advance can be seen as the blueprint for more advances to come in other commodities. Currently, PA is consolidating and in the process of building a pattern that is only about half complete. As you can see in the chart, it might develop over time into an S1 pattern.
Target: around $15,000 (x8 from current prices).
Looking at the chart patterns of CRB Index and the different commodities, a sustained period of big price advances across the board can be expected for an extended period of time. Thus, we have started a new Commodities Super Cycle that should last well over 10 years into the year 2032. The starting point is the panic low in March 2020 when the Corona pandemic hit the world.
Does this mean we should focus our trading on the higher timeframes only? No, not at all. The higher timeframe patterns provide fantastic long-term bullish momentum. This allows to swing trade and go for BigR-multiples. A pattern trade taken in a lower timeframe can then be held for much longer than usual. Based on the above patterns, Silver seems to have the most longer-term bullish potential with a multiple of 13 calculated from current prices ($18.8).
Living and trading during times of a Commodities Super Cycle is not only a challenge, but can be very rewarding, too. During the next 10 years, we should see a tsunami of rising commodity prices that are hard to imagine. The strengthening USD still holds rising commodity prices in check. However, if and when the USD starts to lose its value, we should see the most spectacular price advances.
Do you want to learn more about the multi-bar visual price patterns that tell the story?
Do you want to be part of the next big bullish move for BigR-Multiples?
Why don’t you plan and prepare for these extraordinary opportunities in trading Commodities?
For some more detailed information about the discussed patterns plus what role the value of the USD plays, watch this video:
I look forward to meeting you online soon,
Gabriel
PS: You can also check out the “Sneak Futures Workshop Preview” playlist HERE.
Gabriel teaches the next Futures Trading Systems Workshop starting on September 29th, 2022.