iShares S&P Global Timber & Forestry ETF (WOOD-Q)

(A Top Pick Nov 25/16. Up 9.18%.) Forestry products tend to do well up to the spring home building season, which is right now. What intrigued him about this ETF was West Fraser Timber (WFT-T), the largest constituent in this ETF, which had a reverse head and shoulders pattern suggesting upside potential to about $56, which it hit yesterday. The trend is still higher. He would be looking to take your profits here.

Forestry stocks tend to do well between November all the way through to February. This is the run-up to the spring home building season. There was a bit of chatter of possible litigation with Canadian softwood producers, so he is avoiding that and going with the broad ETF. West Fraser Timber (WFT-T) is the top holding which, between the start of November and the end of April, it has been higher 83% of the time over the past 29 years, with an average gain of about 17%. Technically, West Fraser had a short-term head and shoulders bottoming pattern and it broke out to the upside. He would expect neckline resistance of about $44 would act as support now.

Seasonality is from about the middle of October right through until the middle of January. We are in the starting of the period of seasonal strength for the sector right now. Just today, this ETF broke above a nice little trading range. Stock has already established an upward trend and started to outperform the market. Every year at this time companies like Home Depot (HD-N) start to order lumber for the building season in the spring time.

This is pretty exotic. Not really just timber and large lumber companies, but includes a lot of packaging, etc. Not one he would be buying and he doesn’t see any reason to be buying it right now.

*Short* (A Past Pick July 31/14. Down 2%.) Wood tends to climb this time of year, because it is a period of seasonal weakness for the housing market. After he recommended this, it went significantly lower but then it bounced because of a breakout in the price of lumber. Chart is showing a series of highs. This is still looking good, but watch the price of lumber very carefully.

*Short*. This is the period of seasonal weakness for housing stocks. This tends to impact the demand for lumber. September is particularly weak for the price of lumber. Has declined 80% of the time for the past 20 years for an average decline of 9%. If you do Short this, it’s a good idea to have a Stop at about $53.50.

Seasonally strong Oct to Apr (bull) and Apr to Oct (Bear). One of the best seasonal trades you can have each year.

Forestry kinds of products ETF. He would not want to focus on US names and would prefer Canadian names. Thinks there could be a correction in the housing sector in the US as interest rates go up in the next year or two. It is a range trade at best and you could accumulate on weakness.

The pattern for home builders runs until end of Feb. This one is the same. Sometimes it runs into March. Should start to go up again in October. This is a good time to think about exiting.

(Top Pick Dec 31/12, Up 18.39%) The trend is up and it is not over by any means.

(A Top Pick Dec 31/12. Up 16.11%.) He still sees much upside. There is lots to go yet.

(A Top Pick Nov 16/12. Up 26.87%.) A good way to play the housing recovery in the US. He thinks there is more to go.