The New Sell and Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines, Expanded Second Edition

Question 104—Long Rallies and Sharp Breaks

Answer 1 Carrying charges

Commodities incur carrying charges, as the cost of storing, financing, and insuring them gets worked into their prices. As all of these charges keep adding up month after month, prices could gradually climb to unrealistic heights. What happens instead is that relatively slow and steady price increases get punctuated by brief violent drops, returning prices to realistic levels—and then the process begins again.