With the first quarter now in the books, one thing is certain about some of the best exchange traded products through the first three months of the year.
That one thing being the resurgence of agriculture and soft commodities, some of which had been in lengthy tailspins prior to the start of this year. Several of the first quarter’s best ETFs and ETNs are heavily allocated to agriculture and soft commodities with the iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (JO) leading the way with a quarterly gain of 59.4%. [The First Quarter's Best ETFs]
The bulk of JO’s rally, however, took place from the start of the year through mid-March. From March 11 through March 31, JO is off by nearly 15%. That does not mean JO and the iPath Pure Beta Coffee ETN (NYSEArca: CAFÉ) will not rebound again. Investors should remember where coffee futures are coming from. [Ag Commodities Boosting This ETF]
JO “went on a monster tear higher from late January through the middle of March. Over that time it rose nearly 20% before pulling back to where it is now consolidating at about $35. I wonder how many of you realize though that Coffee was off over 60% in the two and a half years prior to that. This recent ‘massive run up’ has not quite recovered 38% of the fall. Hopefully now you are not so scared about Coffee. Because with the recent cooling off it looks ready to start percolating again,” says Greg Harmon of Dragonfly Capital.
Harmon notes several points that indicate JO could be ready to rally again, including that the ETN “has also retraced 61.8% of that move higher from January, a key level and a spot where technical traders will look for a reversal” and that “the price has moved back within the Bollinger bands (blue area) signaling that actual volatility has decreased. Finally, the Relative Strength Index (RSI) has worked off the technically overbought condition.” [Coffee ETNs Could Rebound]
Although JO has impressed this year, it would still need to gain over 57% to return to its 2012 highs.
iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN
ETF Trends editorial team contributed to this post.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.