CUT Watch

When I scan for trades, the Claymore/Beacon Global Timber Index (CUT) generally doesn't make the cut (so to speak) because of low volume, in the tens of thousands of shares.

	trend	adx	psar	pps	macd	macd trend	sto	sto trend
CUT $19.48

However, both Wednesday and Friday the exchange-traded fund showed volume well above 1 million shares.


The price has pushed above the past year's previous high of $19.01 and is pushing toward price congestion set in 2008, during the collapse of capitalist finance.


You are here:

• Reversal
• $24.60, +26.3
• $22.61, +16.1%
  
• $20.32, +4.3%
• Now $19.48
• Reversal
• $18.55, -4.8%
• $18.02, -7.5%

As always, it's hard to place a reason on why prices do what they do. My best guess would be that housing is recovering, and that means that there's more need to for wood to build those houses.

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The exponential increase in volume, I'd wager, is simply because it's trendy. Many traders make their decisions based on a stories, and timber has an increasingly good story as part of the recovery.
It's the woodsy equivalent of standing in line at 3 a.m. to get the first iPad sold in your city.


I'll put it on the Watchlist. I don't particularly think it's a good trade -- not my style -- but I want to see how it plays out. My best guess: A drop in volume, and a slow slide in price, as interest wanes.

This signal will be followed in the daily Watchlist, which is posted beginning around 2:45 p.m. Eastern. Look for it at www.timbovee.com.

Abbreviations:
psar - Parabolic Stop and Reverse
adx - Average Directional Index
pps - Person's Proprietary Signal
ma20 - 20-day moving average
macd - Moving Average Convergence-Divergence
mfi - Money Flow Index
sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

• trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
• adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
• psar, pps, macd: green for bull mode, red for bear
• sto: green for overbought, red for oversold, yellow for the neutral zone.

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