728x90 AdSpace

Latest News
October 17, 2016

Futures Recap, Week Ending Oct. 21, 2016

By Michael Seery, INO.com


Cotton Futures

Cotton futures in the December contract is now trading above its 20 and 100-day moving average for the first time since last summer as prices spiked higher off of the USDA crop report stating that ending stocks currently stand at 4.3 million bales and that is down 12% from the September report sending prices to a 2 week high. At present, I’m sitting on the sidelines in this market as there is no trend, but it does look to me that a possible bottom has been created as prices settled last Friday in New York at 66.98. It's currently trading at 69.65 up about 300 points for the trading week despite the fact that the U.S dollar has now hit an 8 month high and a 31 year high against the British Pound which is generally a negative influence on commodity prices. Harvest is in full swing in the southern part of the United States as there were concerns about Hurricane Matthew potentially damaging yields as the next report will state if that situation is true. But look at other markets that are beginning to trend and avoid this trade at present, but there could be a possible trade in the coming weeks to the upside in my opinion.

TREND: MIXED

CHART STRUCTURE: IMPROVING

Sugar Futures

Sugar futures in the March contract is now trading below its 20-day moving average which has not happened in several months while still trading above its 100-day as prices have stalled out near the 23 level over the last several weeks as major resistance continues to stand around the 24 level. Rumors of China possibly selling 350,000 tons of sugar from government storage is keeping a lid on prices here in the short-term which could lower Chinese demand as prices settled in New York last Friday at 23.42 while currently trading at 22.97 down about 45 points for the trading week as I am currently not involved in this market. If you are long a futures contract, my recommendation would be to place your stop loss at the 10-day low which stands at 22.52 which is only risking about another 50 points or $600 per contract plus slippage and commission from today’s price level. There is very little fresh fundamental news to dictate short-term price action as prices are still operating right near a 4 year high. At present, I have no trade recommendations in the soft commodities as all my recommendations are in the grain market which is now trending higher.

TREND: MIXED - HIGHER

CHART STRUCTURE: EXCELLENT

Orange Juice Futures

Orange juice futures in the November contract settled last Friday in New York at 198.10 while currently trading at 191.80 down over 600 points for the trading week hitting a 4 week low as I’m currently sitting on the sidelines looking at entering a possible short position once the chart structure improves. Orange juice prices are trading below their 20-day but above their 100-day moving average telling you that the short-term trend is mixed. As this has been one of the best trends to the upside in 2016 possibly creating a spike high about 3 weeks ago at the 220 level as a greening disease here in the United States has lowered production over the last several years pushing prices up to yearly highs. At present, the 10-day high stands at 206 which is about 1400 points away risking around $2,100 per contract plus slippage and commission. I think that is too expensive in my opinion so be patient as we could be possibly in a short position as soon as next week as there is a possibility in my opinion that prices have finally topped out.

TREND: MIXED - LOWER

CHART STRUCTURE: POOR

Coffee Futures

Coffee futures in the December contract settled last Friday in New York at 148.00 a pound while currently trading at 151.50 up about 650 points for the trading week also trading higher for the 3rd consecutive trading session right near a 3 week high as I’m currently sitting on the sidelines in this market as prices have remained extremely choppy over the last several months. The soft commodities, in general, have very few trends as I’m not participating in any of those markets at present. However, this sector is extremely trendy and eventually special situations will come back but avoid the coffee market at the current time. Coffee prices are trading above its 20 and 100-day moving telling you that the short-term trend is higher. However, the chart structure is very poor at present. Therefore, the monetary risk is way too high in my opinion to either enter into a bullish or bearish position so look at other markets that are beginning to trend with a better risk/reward scenario.

TREND: MIXED - HIGHER

CHART STRUCTURE: POOR

Soybean Futures

Soybean futures in the January contract are trading above their 20-day but still below their 100-day moving average reacting bearish to the USDA crop report which stated around 4.3 billion bushels being produced in the United States which is another record production number, however, prices have been very resilient around these price levels. At the current time, I’m sitting on the sidelines waiting for a breakout to occur which could happen above 9.80 in next week’s trade. It certainly looks to me that prices are bottoming out at major support around 9.40 as that level has held on multiple occasions so keep a close eye on this market to the upside as I think all of the bearish news has already been reflected in the price. Soybean prices settled last Friday in Chicago at 9.63 a bushel while currently trading at 9.70 up slightly for the trading week as prices have been stuck in a consolidation over the last 6 weeks looking to breakout in my opinion. At present, I’m recommending a bullish position to corn, oats, rice, and the wheat as I do think the grain market is going higher generally speaking. I am also keeping a close eye on the soybean meal market to the upside as I would like to see another week of a consolidation in the soybean complex which could happen as harvest is in full swing. We will have around 60% of the crop harvested come this weekend as generally speaking the month of November creates the lows in the soybean market.

TREND: MIXED

CHART STRUCTURE: SOLID

What do I mean when I talk about chart structure and why do I think it’s so important when deciding to enter or exit a trade? I define chart structure as a slow grinding up or down trend with low volatility and no chart gaps. Many of the great trends that develop have very good chart structure with many low percentage daily moves over a course of at least 4 weeks thus allowing you to enter a market allowing you to place a stop loss relatively close due to small moves thus reducing risk. Charts that have violent up and down swings are not considered to have solid chart structure as I like to place my stops at 10 day highs or 10 day lows and if the charts have a tight pattern that will allow the trader to minimize risk which is what trading is all about and if the chart has big swings your stop will be further away allowing the possibility of larger monetary loss.

Oat Futures

Oat futures in the December contract settled last Friday in Chicago at 1.90 a bushel while currently trading at 1.98. I’ve been recommending a bullish position from around 1.82 and if you took that trade recommendation place your stop loss under the 10-day low which in Monday’s trade will be raised to 1.79 as the chart structure will start to improve on a daily basis, therefore, lowering monetary risk. The volatility in the oat market indeed is coming back just like I had stated in previous blogs as this commodity can have huge price swings as prices are now trading above their 20 and 100-day moving average telling you that this trend is to the upside. At the current time, I’m recommending a bullish position to corn, oats, wheat, and the rice market as I do think the grain market is headed higher however if you have missed this trade wait for some type of price pullback before entering as I do think higher prices are still ahead.

TREND: HIGHER

CHART STRUCTURE: SOLID

Corn Futures

Corn futures in the December contract settled last Friday in Chicago at 3.39 a bushel while currently trading at 3.53 up about $.14 for the trading week hitting an 11 week high. I’ve been recommending a bullish position from around the 3.40 level and if you took that trade continue to place your stop loss under the 10-day low which now stands at 3.36 as the chart structure is outstanding. Prices are trading higher for the 2nd consecutive day with the next major level of resistance all the way up at 3.80, so there is more run in my opinion as the harvest in the United States is about 45% complete. We will produce another record crop of about 15.1 billion bushels as prices reacted negatively to the USDA crop report only to rally substantially over the next several days. Corn prices are still trading above their 20-day but below their 100-day moving average which stands at 3.60 & if that level is broken I think higher prices ahead so continue to place the proper stop loss as the grain market certainly is catching steam to the upside.

TREND: HIGHER

CHART STRUCTURE: OUTSTANDING

Rough Rice Futures

Rice futures in the November contract settled last Friday in Chicago at 10.09 while currently trading at 10.33 up about $.24 for the trading week. I’ve been recommending a bullish position from around the 10.00 level and if you took that trade continue to place your stop loss under the 10-day low which in Monday’s trade will be 9.97 as the chart structure has turned outstanding at present. Rice prices are trading above their 20-day but still below their 100-day moving average which currently stands at 10.52 and if that level is broken I think the bull market will be at hand so continue to place the proper stop loss as there is more room to run to the upside in my opinion. Rice prices have hit a 7 week high as volatility will certainly increase over the next several months as this is a high-risk trade as rice prices can have tremendous price swings on a daily basis as the true breakout has finally occurred as the grain market as a whole looks bullish across-the-board.

TREND: HIGHER

CHART STRUCTURE: OUTSTANDING

Wheat Futures

Wheat futures in the December contract is trading higher for the 2nd consecutive trading session currently at 4.26 a bushel after settling last Friday in Chicago at 3.94 as prices have now hit a 7 week high due to strong worldwide demand. I have been recommending a bullish position from the 4.16 level which was executed in yesterday’s trade while placing my stop loss under the 10-day low which currently stands at 3.92 risking about $.24 or $1,200 per contract plus slippage and commission. The chart structure is outstanding because prices have just broken out of a 6-week tight consolidation which is a bullish indicator in my opinion. If you take a look at the spring wheat chart prices, have hit a 3 month high. That is starting to bleed into the Chicago wheat as strong worldwide demand is pushing up prices as wheat is now trading above its 20-day but still below its 100-day moving average which stands at 4.45 & if that level is broken I think prices could be substantially higher rather quickly as this can become an extremely volatile market. The chart structure will not start to improve for another 8 days, so your going to have to accept the monetary risk as I am bullish the entire grain market as the trends are finally starting to come back which is a terrific situation as that is what trading is all about.

TREND: HIGHER

CHART STRUCTURE: OUTSTANDING

Trading Theory

What are your rules to initiate a trade on the long or short side of the commodity market? I have been asked this question many times throughout my career and my opinion is simply to buy on a 20-25 day high breakout in price on a closing basis only or sell on a 20-25 day low breakout to the downside also on a closing basis. Many times the price will break the 25-day high and sell off later in the day only to have your trade be negative very quickly. I would rather buy the commodity at a higher price on the close because that gives me more confidence that the market has truly broken out. However, there are more ways to skin a cat and this is not the only answer because some other trading systems might rely on different breakout rules that have also been reliable. Remember always keeping a 1%-2% risk loss on any given trade, therefore, minimizing risks because the entry system I use always goes with the trend because I have learned over the course of time the trend is truly your friend in the long run. I also look for tight chart structure meaning a tight trading range over a period of time with relatively low volatility. I try to stay away from a crazy market that hit a 25 day high in 2 trading sessions versus the 25 high that actually took 25 days to create.

Courtesy of Michael Seery, President, Seery Futures via INO.com

There is a substantial risk of loss in futures, futures option and forex trading. Furthermore, Seery Futures is not responsible for the accuracy of the information contained on linked sites. Trading futures and options is Not appropriate for every investor. My opinion in this blog are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any futures or option contracts.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

© EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle

  • Blogger Comments
  • Facebook Comments
Item Reviewed: Futures Recap, Week Ending Oct. 21, 2016 Rating: 5 Reviewed By: EconMatters