TRADES FOR WEDNESDAY, AUGUST 13, 2014
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources.
GRAINS ATTEMPTING A BOTTOM? In the USDA Grain Report production estimates were up versus a year ago for corn and beans – 16% for beans, 1% for corn. All wheat production was up 2% vs. July but down 5% versus a year ago. The USDA also gave a record yield for corn and bean.
The grains sold off initially but after looking at all of them after the close, there really is not much change technically from what they have been doing lately: attempting to form bottoms in some instances. Corn did make a new low but quickly rectified that by forming a reversal bottom. Wheat did not make new lows. Beans and meal could not take out previous lows in the September contracts. In later contracts where they did, they closed back up in the consolidation they had formed earlier. And technically the long term charts are becoming supportive too. Only bean oil made new lows.
So technically are the grains suggesting that they are becoming oversold and that the report results could be in the market? If that is not the case, this is their best effort at trying so far since the May highs and deserve a A for effort.
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EMOTION is your enemy more than any market will ever be.
TRADE ALERTS - RULES I FOLLOW FOR ENTRY:
1. I do not enter new positions during the night session.
2. I will sometimes wait until after 7:30 am economic reports for entry into economically sensitive markets.
3. If the potential trade PRICE is not reached during the day session (after 7:00 am CST), the trade is not initiated.
4. Computation of costs includes commission plus estimated exchange fees.
5. I normally enter on buy or sell stop orders.
WHAT DO STOP ORDERS MEAN?
In order for my buy stop order to be activated, the market has to rally up to my buy stop price. It then becomes a market order and is filled. If it does not reach the buy stop price, it is not filled.
In order for my sell stop order to be activated, the market has to sell off to my sell stop price. It then becomes a market order and is filled. If it does not reach the sell stop price, it is not filled.
Buy September mini corn. Buy 364 3/4 stop. Protective stop 347 1/2. Potential projection 409 gap. (Potential risk $172.50 per contract. Potential reward $442.50 per contract). Margin: $473.
Reasons for the Trade:
1. On the monthly chart corn is attempting to hold in the same support area that held the market in 2009.
2. On the monthly chart corn is forming a preliminary reversal bottom.
3. The weekly chart is forming a preliminary reversal bottom.
4. On the daily chart corn formed a reversal bottom today.
5. On the daily chart corn has gaps at 370 3/4 and 409. Markets tend to go back and fill gaps.
6. On the daily chart a buy would push corn over the 20 dma. That would be positive.
7. Today was an outside day that can trigger a signal and market direction.
SEPT CORN: It formed a reversal bottom today and rallied up to the 20 dma and stopped. The long term charts are becoming positive too. A trade could be developing. See Trade Alert for details. Closed 358 1/2, up 1 3/4.
SEPT WHEAT: Stops were reached today. It sold off to 533 1/2. It is sitting in previous support and continues to suggest an attempt at a bottom. The buy on the weekly chart is still intact. Watching closely. Closed 538, down 8 1/2.
Position: Long 557 (8.6). Exit 537 (8.12). Loss $255 (including fees).
SEPT BEANS: They continue to give the appearance of forming a bottom on the daily chart even though they closed under the 20 & 10 dma on that chart. A reversal bottom formed over a week ago is still intact and so is a buy signal. Watching closely. Closed 1094 1/4, down 14 1/4.
SEPT MEAL: It too continues to suggest a bottom. Unlike beans it does not have a reversal bottom. It does have a double bottom and a buy signal still intact. It failed the 20 & 10 dma on the daily chart today but did close above them both. Watching closely. Closed 365.20, down 2.30.
SEPT BEAN OIL: It is the only one in the bean complex that has failed an attempt at a bottom last week. A new low was reached today at 34.06. It continues to look headed for 32.00. Closed 34.64, down .28.
OCT HOGS: Switching to October. I made the comment in last night’s Trade Alert that possibly the hogs would rally to set up another selling opportunity. Wrong. They triggered another sell today from yesterday’s inside day and went down limit. In spite of the extensive selloff on the daily chart, the monthly chart suggests there could be a lot more to this. And so does the weekly. October hogs have support at 96.00 and today’s low was 97.17. Best to wait at this point. Closed 97.17, down 3.00.
OCT CATTLE: They are pushing into support on the daily chart. If they don’t hold the support around 148.00, the next support is down at 146.00. The 100 dma on the daily chart intersects there too. Closed 147.67, down 2.77.
OCT FEEDERS: They failed the 216.00 support on Friday. Attempts to get over that support since, have failed. They also violated the 20 dma on Friday on the daily chart too. They formed an inside day today but to suggest a short would require a risk over $1600. Closed 213.70, down 2.65.
DEC COTTON: The reversal bottom continues to hold but cotton is not doing much. So far it has been consolidating in a narrow range around 64.00. It had worked its way over the 10 dma on the daily chart but is under it again today. Cotton production in the USDA Report was estimated to come in 36% higher than last year with an estimate of 17.5 mln bales. The market did not do much which makes me suspect that most of that potential is already in the market. Watching closely. Closed 63.37, down 1.03.
SEPT ORANGE JUICE: Last time rallies were being held back by the 10 dma on the daily chart. Finally yesterday it broke out over that average (and resistance) and reached the 20 dma that intersects up around 145.90. That stopped the market and it sold off. Today it is in a very narrow range. This rally did trigger a buy on the weekly chart and it is back over both the 100 and 20 ma on the monthly chart. Those are positive developments. Possibly the major selloff that started in April is near an end. Closed 143.90, down .05.
SEPT COFFEE: In last night’s Trade Alert I suggested that coffee could be setting up for another wave up. So far, it can’t get over the 190.00 resistance level and may need to consolidate more. Both long term charts are positive. To recommend a buy would require a risk of over $2200 based on the inside day formed today. Closed 184.60, down 4.55.
SEPT COCOA: It has traded into a very narrow range the last two days. During this time it continues to hold at the 10 dma support on the daily chart. At the same time the macd has turned negative. Both long term charts still have buy signals. Just watching. Closed 32.22, unchanged.
OCT SUGAR: Lately every time it tries to break out in a rally, it gives most of it back the same day. This is strange technical behavior and suggests that someone is coming in and selling a lot during these rally attempts. Today is the third time in less than two weeks that this has occurred. It formed a reversal bottom Friday but these attempts to get over the 10 dma on the daily chart have been a failure so far. I suspect it needs to consolidate more. One good development is that it persists in holding at the 16.00 support. Watching closely. Closed 16.05, down .19.
Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. Opinions are subject to change at any time and are not a solicitation or recommendation to buy or sell futures contracts or options on futures contracts. The information contained in this message has been obtained from sources believed to be reliable but is not guaranteed as to its accuracy or completeness. All known news and events have already been factored into the price of the underlying commodities discussed.
Past performance is not indicative of future results. All suggested trades are based on technical signals/indicators and do not include slippage or cost. Not all trades suggested are taken. Results are based on what the signal indicates not necessarily an actual trade. Actual results may vary.
Futures, options and forex trading is speculative in nature and involves substantial risk of loss. These recommendations are a solicitation for entering into derivatives transactions. All known news and events have been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives.