In the 1920s, about 40% of the U.S. labor force worked on farms. Today, less than 2% of U.S. workers are employed in agriculture.

The United States increasingly relies on imported agricultural goods for any number of products. Recently, inclement weather across the globe has caused a spike in the prices of commodities such as wheat, cotton, soybeans and corn. Wheat prices, for example, are about double what they were a year ago. Compared to this time last year, cotton prices have risen 155%, while soybeans are up about 50%. And, due to droughts and floods affecting the world’s biggest corn producing nations, corn futures have increased about 50% in the past year.

#-ad_banner-#A weak U.S. dollar also puts a floor under commodity prices. This is because commodities are priced in dollars, which means as the dollar weakens, commodities must increase in price to compensate for the weakening currency.

One of the best ways to play rising agricultural prices is The ELEMENTS Rogers International Commodity Agricultural ETN (NYSE: RJA).

This exchange-traded note (ETN) — with an expense ratio of 0.75% — holds 20 commodities and is heavily weighted in corn, wheat, soybeans and cotton. Coffee, cattle, cocoa and sugar are also in the fund’s top 10 holdings.

Technically, RJA appears strong. The fund has been in a steep uptrend since June 2010.

In December 2010, RJA bullishly broke out of an ascending triangle. Now the fund appears to be creating a second ascending triangle pattern.

 
This first triangle was formed by the Intermediate uptrend line off the stock’s June 2010 $6.62 low, and resistance, which has become new support, near $10.50.
Since breaking the triangle, the fund has continued to rise, moving toward new resistance around $11.95. This resistance level was recently tested in mid-February and early March.

Although RJA pulled back in the March 7 trading week, it has, so far, managed to stay above the Intermediate uptrend line, which marks the first support level.
If RJA can rally, it could easily challenge $11.95 resistance.

The measuring principle — calculated by adding the height of the triangle to the breakout level — projects a price target of $13.40 ($11.95 – $10.50 = $1.45; $1.45 + $11.95 = $13.40). This is slightly below the fund’s 2008 all-time high of $13.46.

Action to Take –> I would trade RJA if it bullishly breaks the ascending triangle pattern, indicating continued technical strength. Interested traders could place a buy-on-stop order at $11.96, just above current resistance. This means if RJA does not hit or go above $11.96, you will not enter the position. To be on the safe side, it’s a good idea to set a stop-loss near $10.63, below the intersection of the uptrend line and near current support. As calculated by the measuring principle, my target for this trade is $13.40, good for a 12% gain.

P.S. — According to my colleague, a Russian “nuclear catastrophe” will hit the United States in 2013… and when it does, 31 million American’s will suffer. Amazingly, no lives will be lost and a handful of energy stocks could rise hundreds of percent. I know it sounds bizarre, but this bulletin explains what you need to know…