Your parents probably once told you “every dark cloud has a silver lining…”
And that advice is important in trading as well.
Now, in 2018, commodities took a major hit driving many into the cellar.
But a handful are poised for major gains in 2019.
I call these my “silver lining” commodities
And if you play them right, you can score triple-digit gains…
“Silver Lining” Commodity ETFs That Can Be Your Access to Triple Digit Gains in 2019
An oversupply of oil by OPEC and Russia, metals getting hit on speculation of slowing growth and a trade war between the U.S. and China…
This was the climate in the commodities market in 2018. Not surprisingly, this lead to a crash in commodity prices across the board. But just because Of course, as traders our job is to find a silver lining in any dark clouds.
So far in 2019, the silver lining is starting to shine through.
As you can see in the chart below on the S&P 500 GSCI Commodity Index (NYSE: GSG), commodities have risen about 7% so far in 2019.
In November 2018,
Goldman Sachs (NYE: GS) predicted a rebound in commodities in 2019 after a 2018 selloff.
GS also stated that it expected a 17% rise in oil, gold and base metals in 2019.
Their prediction appears to be coming to fruition.
Let’s move through some great commodities to consider in 2019. Of course, you can trade futures to profit. If you’re not a futures trader, don’t worry. You can also trade ETFs, which I will reveal below.
Oil (ETF NYSE: USO)
December 2019, OPEC and Russia agreed to cut supply and has maintained the cut. This has already led to a rebound of 19% since December lows. Technically speaking, NYSE: USO is currently trading above its 50-day moving average and has formed a bullish “upside-down” head and shoulders pattern suggesting that the rebound has legs.
An ideal entry point is a close > 11.5 (head and shoulders neckline) on above average volume.
Gold (ETF NYSE: GLD)
U.S. growth is expected to slow down next year paving the way for a flight to safety into gold. The U.S. dollar strong bullish trend is also expected to reverse driving dollars into the defensive asset.
The chart of the gold ETF (NYSE: GLD) below reveals that gold is already on the rise this year confirmed with a recent golden cross (50-day MA cross above 200-day MA).
Palladium (ETF NYSE: PALL)
Palladium has been the best performing commodity for 2 years in a row rising 56.25% in 2017 and 18.59% in 2018. It is currently on par with the price of gold. This is not surprising when you consider that 80% of the world supply is used to build catalytic converters.
A look at the charts reveals that palladium is continuing its strength in 2019 with a 5% rise. The stock is above its 50-day MA, which in turn is above its 200-day MA and rising. Charts don’t get much more bullish than this.
Note: This ETF does not have options.
Now, the question is: how do you profit?
The most obvious answer to this question is to simply buy and hold the above ETFs. If Goldman Sachs’ prophecy comes true, you can expect a gain somewhere in the 17% range for 2019.
That isn’t bad, but it’s not good enough for me.
I use options to greatly increase my returns.
Here are three “options” to play commodities for major gains:
1. Buy ETF and sell 30-day covered calls.
For example, the monthly ATM/slightly OTM options on USO are bringing in $0.45 per contract. With USO currently trading at $11, that’s a 4% monthly return on the stock. Annualized, that’s a 48% return on your asset! And that doesn’t account for any rise in value of USO.
2. A simple strategy that can turn the smallest gold movements into triple-digit returns – whether the market is up, down, or sideways.
I’m not talking about anything risky, either – like some junior miner in Congo… or futures… or those heavy gold bars you need a wheelbarrow to haul into storage…
It’s better than all of those combined…
I call it SpeedGold… and today, I’m showing you how this obscure pattern could make you 5, 10, even 15 years’ worth of gold profits in 30 days or less. Get all the details right here.
3. 1 Buy ITM 6 Month Call Option and Sell 30-day Covered Calls.
This is an advanced option strategy called a diagonal spread.
Instead of buying the asset, buy an ITM option (delta of 70-80) to create a much cheaper surrogate for the stock. This creates a stock surrogate minimizing time risk (extrinsic value in the option).
For example, a 6-month ITM option on USO (July 9 Call) will currently cost you $2.35 per share. 100 shares of USO trading at $11 would cost you $1,100. 1 USO July $9 Call option would cost you $235 (100 shares controlled). That’s a 79% discount on your cost of the asset.
Six months of covered calls as described in the previous point will bring in $2.64 of premium covering the cost of the long calls. This may sound a bit complicated, but with practice you’ll be able to master it. The benefits are certainly worth it!
Now, folks, that’s how you find the silver lining in any storm. And this silver lining is delivering some major profits.
That’s all for now,
Tom Gentile
America’s #1 Pattern Trader
