The price of wood products, especially lumber, has fluctuated greatly in the last three years. Therefore, traders in these markets have many questions and do not have a clear picture of the future of the market. Various factors such as the amount of housing construction in the US, inflation, transportation costs, and other issues are influential in the price movement. But in this article, we are going to forecast the lumber price trend for the next one or two years only from a technical analysis point of view. What is the trend of timber prices in 2023? Stay with us.
Analysis Model
Technical analysis is one of the most widely used analyzes to predict financial markets. In this analysis, with the help of graphs and related information such as price, volume, and time, as well as various techniques and tools, the general situation of the markets and the price of various assets are examined. The main philosophy in technical analysis is: Let’s predict the price’s future based on its past behavior.
As can be seen from the title of the article, in this article we are going to forecast the future of timber prices for 2023. Please note that our analysis method is based on Elliott Waves theory with Robert Prechter’s style. Therefore, this is not a tutorial article, but only the result of the analysis will be mentioned here. Those interested in learning this method can refer to the links mentioned in the article.
Lumber Price
What we are going to analyze here is the Chicago Lumber Futures (LBS). The trend of lumber (timber) prices in many markets is correlated with this index. Its symbol on tradingview.com is LBS1. For more information see What Is the Global Wood Price Scale?
Lumber Price (LBS) Forecast for 2023 Based on Elliott Waves
In the image below, you can see the LBS chart from 1972 until now (the time of writing this article).
From April 2020, a big jump in the price of this symbol can be clearly seen, which caused its growth of 500% in one year. After that, it faced two extreme fluctuations in the last year, which is unprecedented. Here we have nothing to do with the fundamental reasons for this issue. These extreme swings in our wave count (which you’ll see below) signal the end of wave one of the big cycle.
Elliott waves show rare behavior in future markets. As you can see in the image below, it seems that the price has completed the expanding leading diagonal pattern as wave 1 of a big cycle and is now in wave 2. This pattern is one of the rare patterns and usually happens when waves 3 and 5 are both really extended including a deep wave 4. For more information see Introduction to Diagonals.
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Note that the above analysis is based on Robert Prechter’s way of counting waves.
According to the format of the chart, probably wave 2 of the big cycle will be complex (The image below).
W-Wave has completed flat and we are now in X-wave which will cause the price to grow to the limit of 910 over the next two to three years.
Final Forecast:
According to the above analysis, The trend of the next few years (from early 2023 to late 2024) of the LBS symbol will probably be bullish, and in this direction, the price reaction to the resistance of 640 is very important.
Conclusion
In this inflammatory era, when prices are not stable, it is very difficult to “forecast” the price of wood, because this important raw material changes constantly under the influence of various fluctuations, such as inflation, the dollar index, and the price of energy. This long-term technical look at the timber price chart can provide us with a clearer view of the future.
In this article, we analyzed the LBS chart based on the Elliott wave theory and as you saw, according to this analysis, we predicted the uptrend of lumber prices for 2023. It is important to pay attention to several points here. Technical analysis is essentially an analysis based on probabilities and there is no certainty in it. Without a clear trading strategy, analysis alone will not be useful to you, and even a correct analysis will be worthless.
1 Comment
Is it naive to hope that the inflation will stop next year, it’s been crazy how high the prices have been
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