Lumber drops 30%, but could this bring a buying opportunity?
Lumber has been hit hard over the course of the week, but could this 30% collapse bring a fresh buying opportunity?
Lumber tumbles after historic rise
The price of Lumber has been on an incredible rise over the course of the past year, with the 13-months leading to last Monday’s high of $1711.88 bringing an incredible 564% of gains. In fact, this has been the top performing asset over the course of the past 12-months.
Unfortunately, what goes up will often come down, with prices falling over 30% in the week since. The sharp decline in US and Canadian housing starts has provided a warning sign over demand, enhancing the losses seen last week. Does this mark the end of this bullish trend? Not necessarily so. Invariably a runaway move can bring equally sharp retracements. The daily chart highlights that, with the latest pullback looking an almost carbon copy of the run-up leading to last week’s high. From a price action perspective, the bullish trend remains in play unless price falls below the $775.22 low seen in March. With that in mind, it makes sense to view this current pullback as a retracement, with the ascending trendline providing an area of interest for bulls. As such, watch for this pullback to potentially end around the confluence of Fibonacci and trendline support.
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