I was scanning through some charts tonight when I decided to take a look at U.S. Commodities, and I found a great idea for a short. Take a look at these two charts of the Goldman Sachs Commodity Index for Agriculture prices (symbol $gkx on stockcharts.com).

Trend

First, the weekly shows a very clear double top and subsequent downtrend. Analysis of the double top coincides nicely with the previous low

at around $246. We get confirmation that this is a continuation pattern as the current bounce in prices turned around right at the Fibonacci 38.2% mark.

Further supporting the continuation, the ADX and ROC have already begun rolling over.

Trade

The daily chart show a strong line of overhead resistance. Today marks a great entry point, with little downside support until the 246 level. From the current level of 288.2, that would be a nice 15% profit.

At the 246 level, reevaluate the trend, as there are two very different possibilities for this index. The first is that there could be more downside potential toward the 216 level. The second, which is far more interesting is this:

In 2007 this chart broke out of the perfect cup with handle. I has since returned back to pre-breakout levels. Is it possible we’ll see agriculture drop down to levels seen in 2000 / 2001? Either way, it looks like a great time to be short here!

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