Conclusion, Investment Implications, Strategy

The iShares Global Timber & Forestry ETF (WOOD) is amid favorable conditions to resume its July 2020 Strategic advance from Tactical underlying support near $86.00, which was tested and held in late March.  A sustained rise above the $86.00 area would target an additional 15% rise to $105.00 per share. 

 

Editor’s Note: WOOD is an ETF with very low volume and net assets, so investors should carefully consider that in their investment process.  However, the ETF’s purpose is to track the S&P Global Timber & Forestry Index and, as a result, has maintained what we would consider to be relatively stable price movement despite it’s lack of activity.

Analysis and Rationale

The iShares Global Timber & Forestry ETF (WOOD) seeks to track the investment results of the S&P Global Timber & Forestry Index. The fund generally will invest at least 90% of its assets in the component securities of the underlying index and in investments that have economic characteristics that are substantially identical to the component securities and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents. The index is comprised of approximately 25 of the largest publicly traded companies engaged in the ownership, management or upstream supply chain of forests and timberlands. The fund is non-diversified.

The upper panel of Chart 1 below plots WOOD daily since September 2020 along with its 200- and 50-day moving averages, widely-watched major and minor trend proxies.  The lower panel displays a corresponding daily relative performance chart of WOOD versus the benchmark S&P 500 (SPX, blue) along with its 63-day moving average (green, quarterly, our Strategic time period).

Chart 1

The rightmost green highlights in the upper panel show that WOOD appears to be resuming its July 2020 major uptrend, as defined by its 200-day MA, following a Mar 25th test of the 50-day MA.  Meanwhile, WOOD’s current trend of quarterly relative outperformance versus SPX as shown in the lower panel also appears to be resuming following a test of it on that same date.  Note that similar outright and relative conditions on Oct 28th also led to a resumption of those trends.    A sustained rise above the 50-day MA, currently situated at $86.00, would help to confirm this and would target an additional 15% rise to $105.00 per share. 

Table 1 below shows that considering the aforementioned upside target and a protective stop placed below the $87.65 area, a long entry price of $91.40 would provide a 1:3.6 risk/reward ratio (risking $1.00 to make $3.60) with an initial risk of 4.1%.

Table 1

 


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