CME Group (CME) was raised to an outperform rating (buy) by a sell-side firm here on Thursday. Let's check and see what is happening in the pits of the futures trading exchange.
In this daily bar chart of CME, below, I see that prices are still in a downward trend. CME trades below the bearish 50-day moving average line and below the negatively sloped 200-day line. The trading volume has been heavier than average the past three months and could represent a change in ownership from weaker hands to stronger hands. The daily On-Balance-Volume (OBV) line shows weakness from March to December. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line in sell territory.
In this weekly Japanese candlestick chart of CME, below, I can see recent improvement. Prices are still in a longer-term downward trend as prices trade below the declining 40-week moving average line. Small real bodies and small lower shadows on the two most recent candles are encouraging. The weekly OBV line has turned higher in the past three months. The MACD oscillator has crossed to the upside for a cover shorts buy signal.
In this daily Point and Figure chart of CME, below, I can see that the software suggests a downside price target in the $153 area. A trade at $160 is needed to refresh the downtrend.
In this weekly Point and Figure chart of CME, below, the chart suggests an upside price target in the $193 area.
Bottom line strategy: I have a longer-term view that commodities are in a new secular uptrend and therefore we are likely to see more trading activity for commodities in the months ahead. More volume should mean higher prices for CME. Traders should look to be patient buyers of CME perhaps closer to $160.
