DBA Invesco DB Ag Fund Weekly Chart; Oversold; Positive Divergence Developing; Megaphone; Lower Band Violation

The DBA ETF is smacked hard this year. Commodities have taken a beating. DBA is stabbed in the liver and bleeding in the dirty alleyway behind the CBOT. Poor DBA is left for dead.

The coronavirus (COVID-19) has destroyed many commodities due to the destruction of the supply chains. The grains cannot be shipped anywhere if everyone is sitting home and nothing is moving. Dairy farmers in Wisconsin are dumping gallons of milk. A couple potato producers in Idaho are giving away potatoes for free since they will only go to waste. In Iowa, 2 million chickens are culled after workers become infected with covid. Other meat and poultry plants are not operating at full capacity since it is hard to lure employees, that are afraid of getting infected, back to work. The global agricultural trade has been knee-capped.

President Trump disrupted agricultural trade around the world with the ongoing trade war with China. Farmers, many that voted for Trump, were slapped around like a beach ball for a couple years. There is a farm bankruptcy in all states in the US over the last year. It is interesting to see that some of those farmers voting for Donnie, hoping for a better future, only ended up selecting their demise. So the trade deal with the communists is finalized, the phase one thing where Trump does not say how many phases there are, you know, all the same old stupid game-playing stuff, and US farmers begin breathing easier. Farmers take a couple extra swigs of apple cider on New Years and look forward to a stupendous 2020.

Then the coronavirus hits. Supply chains are gone overnight. Suddenly, the decent prices for ag goods, which showed promise to continue this year, were tossed out the window like a cigarette butt. Prices plummet into deflation.

All that doom and gloom aside, Keystone always looks for opportunities. The general market is a mess right now. The markets are in a whipsaw pattern changing direction each day or so chewing up bulls and bears alike. It is best to spend a lot of time watching in these markets. Picture your portfolio as a bar of soap; the more you handle it, the smaller it gets.

DBA is in a strong downtrend, no denying that. Price is slipping down into that small falling wedge, which is bullish. Ditto the RSI, histo, stochastics and money flow all displaying positive divergence. RSI and stoch's are oversold also agreeable to a bounce occurring. Price is below the moving average ribbon requiring a mean reversion higher.

DBA has violated the lower standard deviation band since March so the middle band at 15.25, and dropping is on the table, also the upper band at 17.54 but remember this is a longer-term weekly chart so it may take many many weeks and months to get there.

The price expansion pattern, or megaphone pattern, is shown. Keystone added a mouthpiece and handle so you can visualize the megaphone easier. DBA has respected the megaphone since mid 2018 almost 2 years. The next move would be for price to bounce and migrate towards the top rail of the megaphone again.

The DBA daily chart is possie d across its indicators. Ditto the 2-hour chart which would be agreeable to buoyancy going forward. However, there is always a fly in the soup. Keystone called a waiter over to the table a few months ago asking, "What is this fly doing in my soup?" The waiter took a look, paused, and said, "The backstroke." The MACD line remains weak and bleak in the weekly time frame.

Keystone is buying DBA and opened a long position. On the weekly basis, she's going to bounce now and probably for a week or two due to all the possie d. However, after this several-day and week or two of upside recovery joy, DBA will roll back over lower and seek a matching or lower price about three weeks out. When price comes back down after the initial week or two pop, the MACD will likely positively diverge and identify the firm solid bottom no the weekly chart. This will place a significant bottom in DBA and price will rally for several weeks to the upside.

Thus, choose your poison. If a risk-taker, you can buy DBA now and look for that one or two week rally that should begin right away. The key is not to be too greedy, you just want the cream off the top so after it pops, take the money. DBA is not worth shorting now so then you can hang tight until it likely comes back down again, on the weekly basis, due to the weak and bleak MACD. Once the MACD goes possie d, sometime in May, you can monitor the chart and know what to look for, the multi-week rally will begin for DBA.

Despite the doom and gloom around commodities and the realization that the coronavirus saga will continue to hurt the sector for a while, the DBA chart is setting up nicely. Thus, one must think about the fundamentals before speculating. Keystone will be buying more DBA this week looking for the near-term pop. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.