How is Trading Behavior in Commodity Futures Affected by the 52-Week High and Low?

Abstract

We use the Commodity Futures Trading Commission’s Commitment of Traders report to investigate the trading behavior of traders in 12 commodity futures markets. Commercial traders are contrarian, consistent with anchoring and the prevalence of short hedgers. Noncommercial traders follow momentum strategies, reflecting the presence of CTAs trading in attention grabbing futures. Our key contribution is in understanding the effect of trading at the 52-week high and low – technical levels that are known to influence investor behavior – where we find trading is moderated at the 52-week high (anchor reversion) and accentuated at the 52-week low. Our results are consistent regardless of whether the futures market is in backwardation or contango. We find little support for evidence of market timing ability for either trader type.