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Many commodities and currencies have experienced steep increases in recent months. Oil is up almost 100%, copper over 80% and the Aussie 30%. So is it time to start shorting?
Well I think there are some overbought positions occurring and for the traders yes there are some opportunities. The last few months in equities, commodities and currencies has been very much a traders market. An active trader needs to learn the skills on both sides of the trade. If you are not an experienced ‘shorter’ it is probably a little late to try and ‘quickly’ learn the skill – that is something you do when the market is heading higher.
However if you have all the theory of shorting under your belt and reckon you are near ready to try then now is as good as any time to review your training, your shorting strategy and your rules of entry and exit. The disciplines are absolute key in shorting – more so than in going long. Take it from an old trouper.
The Aussie came off overnight:
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So it may just be tough to stay with a short for very long although there will be money to be made in intraday and intra week. The Aussie is the flavour of the month and we are probably not likely to see too much retracement as it will find strong support at that 75 cent level.
So look at something that is perhaps more vulnerable – say oil – the higher they rise the harder they bounce:
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I am not saying oil will fall to US$16 – but I am suggesting that it has more to give up and probably has gotten ahead of itself and the world economic fundamentals.
So dust down skills you haven’t used in recent months and take advantage of volatility in these markets.
Enjoy the ride
Tom Scollon
Chief Analyst
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