Lumber futures have been on fire recently (I know, I couldn’t help myself), closing at 93% Bulls on 07/10/20. That’s the highest sentiment reading for Lumber Futures since they hit 95% Bulls over two years ago on 05/17/18. As always, the question now is what happens next? If the past is any indication, Lumber Bulls should expect more upside from here – let’s take a look at the details.
Since 2006, Lumber Futures closed >90% Bulls while also gaining between 7-9% Bulls over the previous three trading days only 10 other times. Of those 10 instances, Lumber Futures made a higher close each time within five trading days. For traders looking for more upside than a higher close, we should point out that Lumber Futures were higher 90% of the time for an average gain of 4.7% after 13 trading days.
The first time this signal triggered was on 12/16/10 – before Friday, the last time this signal triggered was on 04/27/18. Both instances saw nice gains over the following weeks – we expect the same now.
We’re looking to get long below Friday’s close and tighten up the trailing stop after the first profitable opening.