After bursting out of the gates to start 2014, some agriculture exchange traded products have spent the better part of the past seven months in tailspins.
The PowerShares DB Agriculture Fund (NYSEArca: DBA), which surged in the early part of this year, is now up just 5.9% compared to a 10.2% gain for the S&P 500. However, the pain for agriculture ETFs and exchange traded notes (ETNs) appears to be abating with potentially significant rallies ahead for previously maligned ETFs and ETNs featuring exposure to corn, grains, soybeans and wheat. [Corn ETF Rallies After USDA Trims Forecast]
Over the past month, the iPath Dow Jones-UBS Grains Subindex Total Return ETN (NYSEArca: JJG) has surged nearly 9% and the ETN’s charts say that rally may just be getting started.
“The Power of the Patterns take on JJG is this – A bullish falling wedge seems to have formed, which suggests that 65% of the time a rally will take place. This bottom of the wedge formed at a potential triple bottom,” notes Chris Kimble of Kimble Charting Solutions. “JJG of late appears to be breaking out to the upside of this bullish falling wedge. To no surprise, sentiment levels are very depressed in all three grains, with Soybeans having the fewest bulls of the three, just 28%.”
Chart Courtesy: Kimble Charting Solutions
JJG, home to $173.5 million in assets under management, is also home to several of the most disdained agriculture commodities, potentially giving the ETN potency as a trade that pays off for the bulls due to extreme bearish sentiment.
Of the 17 worst-performing commodities this year, three are corn, soybeans and wheat, which just happen to be three commodities found in JJG.