Lot of folks asked me how to exit a commodity stock. Here is one small reckoner list: pl note these are not exhaustive reasons I exit a commodity stock.
1. Follow commodity prices on LME spot & future contract values
2. Usually, LME warehouse stock levels give you hints much in advance. If warehouse stock is rising then check two things - spot price & capacity coming on stream
2. Usually, LME warehouse stock levels give you hints much in advance. If warehouse stock is rising then check two things - spot price & capacity coming on stream
3. Follow historical cycle & correlate with total capacity available. Is the spread of spot and future widening?
4. When commodity cycle peaks, companies run out of capacities. Look for capacity utilization insights given by managements.
4. When commodity cycle peaks, companies run out of capacities. Look for capacity utilization insights given by managements.
5. Usually, near peak, recycling activities pick up sharply. Follow this trend too.
6. Follow technicals, global price trend, and global consumption cycle & not brokers/institution reports. Such reports always lag the cycle.
6. Follow technicals, global price trend, and global consumption cycle & not brokers/institution reports. Such reports always lag the cycle.
7. Such reports make you believe little more in the cycle, you stay in little more than you should have, and end up selling on declines.
8. If you don't understand commodity cycle intricacies, put a trailing SL GTC.
Any more questions, I'd try to answer.
8. If you don't understand commodity cycle intricacies, put a trailing SL GTC.
Any more questions, I'd try to answer.
Also watch for an uptick in refractory businesses. If such businesses start reporting good numbers, it is good to book profits in commodities. Refractories don't perform on short supply of commodity. Big secret correlation I finally disclosed. 🤩
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