Lumber is a major input in our economy, serving as a signal of growth as well as inflation.
After a quick 25% correction in the price of lumber, a confluence of factors suggest it may stop going down. See chart below.
– Price has reached a notable prior support level.
– Trend support from the rally low is in play.
– This price level is also the .382 retracement of the entire rally.
– Long Term momentum is still intact.
Lumber Price Chart
ETFs reference: NYSEARCA:XHB, NYSEARCA:ITB, NYSEARCA:IYR
If you don’t trade lumber, we can still follow along to evaluate the market. This is an especially interesting price area to watch given the weakness in the housing sector. This support confluence is about as strong as you can get.
I fully expect this area to hold up and at some point bounce, but it will tell us just as much if this area doesn’t hold.
Traders never know ahead of time if a trade is going to work out. That’s why we wait for these fat pitches with a confluence of factors suggesting a good risk-reward setup.
Trade ‘em Well.
Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.