Last year was a tough one for the commodities complex and most agriculture commodities were not spared punishment.
The PowerShares DB Agriculture Fund (NYSEArca: DBA) was among the punished, faltering 13.2%, but the found has bounced to gain 4% in 2014. The $1.24 billion DBA does not hold physical commodities. Rather, it tracks the DBIQ Diversified Agriculture Index, giving the fund exposure to multiple farm-based commodities. [Spotlight on Agriculture ETFs]
DBA’s rebound has taken the fund back above its 50- and 200-day moving averages and it now faces a stiff technical test in the $26 area.
“DBA is too far extended for a low-risk entry point, but we will continue to monitor the action as we wait for a 4-5 base to form above the 40-week moving average. We’d also like to see the 10-week moving average climb above the 40-week moving average, and for the 40-week moving average to turn up, according to Deron Wagner of Morpheus Trading Group.
“The longer-term monthly chart below shows that DBA could possibly stall out above $26, as there is resistance from a prior swing low and a weekly downtrend line. The ideal price action over the next several weeks is for DBA to break the downtrend line on heavy volume, then base out for several weeks above $26,” added Wagner.
Pivotal to DBA’s near- to medium-term fortunes are three commodities that, in consumption terms, often go together: Coffee, cocoa and sugar. The combined base weight to those commodities in DBA is about 35%.