Looking at JO, “you can see that the price has been trading sideways for much of 2015-16. Based on the extreme showing on the Volume by Price indicator, it appears as though the bulls and bears are at a stalemate near current levels. The slight shift higher puts the bias in favor of the bulls and based on the chart it looks as though the next stop could be in the mid-$30s sometime in 2017,” reports Investopedia.
Oil prices posted the best annual showing since the global financial crisis last year, but investors should look to limit the potentially erosive effects of contango.
To limit the negative effects of contango, investors may consider investing in futures-backed commodity ETFs with longer-dated contracts. For instance, the PowerShares DB Oil Fund (NYSEArca: DBO) and United States 12 Month Oil Fund (NYSEArca: USL) provide exposure to WTI oil but include a different weighting methodology to limit the negative effects of contango. DBO can include contracts as far out as 13 months and dump contracts at any point to maximize gains or minimize losses associated with the implied roll yield. USL, on the other hand, ladders 12 months of contracts to better control for backwardation and contango.
For more information on the commodities market, visit our commodity ETFs category.
