Vermilion Compass: Weekly Equity Strategy
Upgrading Energy & Materials to Overweight2018 is setting up to be an attractive year for commodity-related sectors.
Both Energy and Materials have hurriedly advanced within our relative strength rankings over the past several weeks--now ranking #2 and #4, respectively--confirming the widespread patterns visible in the charts of each Sector's constituents: bottoms and bases.
We have highlighted these evolving set-ups over the past year, identifying: improving internals in energy (Aug. 12), then labeling it as a bottom the following week; also, reiterating copper nearly twelve months ago from today, recommending fertilizers (Dec. 13), and reiterating metals & mining stocks (Dec. 18).
Given the improving relative strength trends coupled with constructive patterns, we are upgrading both to overweight from market weight.
However, these upgrades are not limited to just RSR and pattern-related improvements. Additional technical tailwinds are visible in (1) the USD, which continues to roll over, even with the Fed normalizing interest rates; and (2) bullish trend reversals throughout commodities. On the latter, within energy, both Brent and WTI broke out from three-year bottom patterns last quarter, marking the start of what we see as a march to much higher prices. The consensus view seems to still believe otherwise. Base metals, too, exhibit bullish technicals. Copper is the obvious “Exhibit Aâ€, having advanced 31% over the past twelve months. (We originally highlighted copper as bullish in Nov. 2016.)
Accordingly, the technical weight of the evidence favors a bullish outlook for Energy and Materials. Increase exposure.
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Agriumis a retailer of agricultural products and services in the U.S., Canada, Australia, Argentina, Brazil, Chile and Uruguay and a producer and wholesale marketer of nutrients for agricultural and industrial markets. Co. reported its business through two business units, Retail, which operates in North and South America and Australia, providing crop inputs and services directly to farmers; and Wholesale, which operates in North and South America and Europe, and produces, markets and distributes all major crop nutrients for agricultural and industrial customers both domestically and around the world.
Vermilion Research delivers timely, actionable, and unique research inputs to professional investors. Our research strategists highlight securities which we believe are at major inflection points, based on our various proprietary technical indicators, and offer asymmetric risk/return profiles. We believe our research methodology, which is not limited by industry sector or market capitalization, enables us to deliver superior investment recommendations.
Our process begins by organizing all actively traded stocks into coherent sectors, then into logical industry groups. We then apply our proprietary relative strength tools to identify developing price trends. Once attractive trends are identified within a selected sectors or groups, we screen for individual stocks which we believe offer the best risk/reward profile. Vermilion offers U.S. and global equity market research products. Vermilion’s research team, which has received numerous awards and accolades, has a combined 70 year of experience in the analysis of investment securities.
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