{"id":19845,"date":"2022-06-27T07:30:32","date_gmt":"2022-06-27T11:30:32","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19845"},"modified":"2022-06-27T07:30:32","modified_gmt":"2022-06-27T11:30:32","slug":"it-pays-to-be-a-contrarian-in-this-unique-sector","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/it-pays-to-be-a-contrarian-in-this-unique-sector\/","title":{"rendered":"It Pays To Be a Contrarian in This Unique Sector"},"content":{"rendered":"

When it comes to trading commodities, it usually pays to be a contrarian.<\/p>\n

Going against the herd, buying when everyone else is selling, and selling when everyone else is buying is a viable trading strategy in most financial markets.<\/p>\n

But it works especially well with commodities because the forces of supply and demand are so pronounced.<\/p>\n

After all, when demand for a commodity is so strong that it pushes prices higher, producers kick into gear and increase supply (thereby maximizing profit).<\/p>\n

And that increased supply helps push prices back down.<\/p>\n

That’s not generally true with other investments – like stocks, for example.<\/p>\n

Investor demand for a stock isn’t often met with the company increasing the supply by issuing new shares of stock. So, the price trends tend to be more persistent.<\/p>\n

This natural “ebb and flow” of supply and demand in the commodities market makes it well suited for a contrarian style of trading.<\/p>\n

Think about the situation in natural gas we wrote about earlier this month<\/a>.<\/p>\n

At the time, natural gas was extremely overbought – up 150% for 2022. Just about all the financial talking heads were bullish on the price.<\/p>\n

But based on technical indicators at the bottom of the chart (MACD<\/a>, RSI<\/a>, CCI<\/a>) the setup looked “toppy” to me, and I suggested natural gas would likely be lower in the weeks ahead.<\/p>\n

Let’s look at the UNG chart to see what happened…<\/p>\n

\"Chart\"<\/div>\n

The price of natural gas fell 30% in about two weeks.<\/p>\n

Contrarian traders had an opportunity to make significant gains by betting on the downside.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Or, at least they avoided steep losses by not following the herd and buying natural gas when everyone else was bullish on it.<\/p>\n

These sorts of setups happen all the time in the commodities markets.<\/p>\n

The Relative Strength Index (RSI) at the bottom of the chart tracks whether a stock is overbought or oversold. Oscillating between 0 and 100, the RSI determines a security is overbought over 70 and oversold below 30. <\/p>\n

Traders can profit by looking for overbought conditions (over 70) where investor sentiment is overwhelmingly bullish, and then selling or shorting the commodity.<\/p>\n

Or traders could look for oversold conditions (below 30) where investor sentiment is remarkably bearish, and then buy the asset.<\/p>\n

Best regards and good trading,<\/p>\n\n\n
\"signature\"<\/td>\n<\/tr>\n<\/table>\n

Jeff Clark<\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

Will you look for bearish or bullish conditions in natural gas?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Contrarian traders had an opportunity by betting on the downside… <\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-19845","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19845","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19845"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19845\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19845"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19845"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19845"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19845"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19845"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19845"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19845"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}