Investors have completely given up on this commodity
From Steve Sjuggerud, Editor, True Wealth Systems:
It’s been beaten down, left for dead, and just forgotten.
When an asset underperforms for multiple years, investors tend to give up on it. They get burned and move on… at least for a while.
Today, we are looking at a commodity in that exact situation.
It’s down 44% since peaking in 2014. Investors want nothing to do with it… But history says a triple-digit jump is possible thanks to this extreme negative sentiment.
Here are the details…
When you think about commodities, you probably think of oil and gold… maybe even crops like corn and wheat.
Today’s commodity is a bit more obscure. It’s probably off your radar. Honestly, it’s probably off everyone’s radar.
We’re talking about hogs.
You see, hog prices have fallen dramatically over the past three years. The commodity is down 44% since peaking in 2014. And not surprisingly, investors want nothing to do with it.
It only takes a quick glance at the Commitment of Traders (COT) report for hogs to see this extreme sentiment.
The COT report is a real-time indicator that shows what futures traders are doing with their money. It’s a great investment tool. It shows us contrarian bets when futures traders all agree on an outcome.
When futures traders are all making the same bet, the opposite is likely to occur. Right now, futures traders are all betting on lower hog prices. Take a look…
Their bets have only been this extreme a few times over the past decade.
We saw similar extremes in 2009, 2012, and 2015. Each extreme lead to dramatically higher hog prices in the following months…
From August 2009 through April 2011, the commodity jumped 134%. Then another similar setup happened in mid-2012. Hog prices bottomed shortly after and then rallied 85% in less than two years.
In mid-2015, investors gave up on hog prices again… right before the commodity soared 70% in less than a year.
These are incredible returns. But it’s what can happen when investors completely give up on an asset. Today, futures traders have given up on hogs once again.
One way to take advantage of this is through the iPath Bloomberg Livestock Subindex Total Return ETN (COWTF). The fund tracks the Bloomberg Livestock Subindex Total Return Index. Its main focus is on hog and cattle futures.
We aren’t officially recommending COWTF today. The uptrend simply isn’t strong enough. But this is a fantastic long-term setup. And when the uptrend returns, hog prices could potentially see triple-digit gains.
Crux note: Steve’s trading strategies cover every corner of the market – more than 40 different sectors – so readers will always have the opportunity to make money somewhere… even in hogs.
And only Steve’s True Wealth Systems subscribers can get immediate access to the team’s weekly Review of Market Extremes.
For more details, click here.