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.
OPTONS PLAY: HOW LONG WILL CORN AND SOYBEANS FALL?
WILL THE CORN AND THE SOYBEANS SHRUG OFF THE USDA REPORT ON THE 30TH AND CONTINUE TO DROP SHARPLY?
MY SOYBEAN FUNDAMENTALS
Fundamentally, the soybeans are no doubt in a weather market in my view. According to a great Bloomberg article today, “Damage from flooding and hail may cut planted area for corn and soybean by 2 million acres, Michael Cordonnier, the president of Soybean & Corn Advisor Inc. in Hinsdale, Illinois, wrote in a report today.” So if expectations like that heading into the report are not met, then we could see the falling knife continue in the beans.
However, as they say on LaSalle street in Chicago where the CME pit is located, “Rain Makes Grain.” So I’m in the bear camp. If expectations are not met and we get a much lower acreage number for soybeans on this USDA report on the 30th, I would expect further declines in prices or maybe sideways action even.
Options on Beans for People Who Don`t Know Beans About Options: http://www.zaner.com/offers/?page=8&ap=mmckinne
MY SOYBEAN TECHNICALS
Technically, I have added my favorite technical indicators to this chart below. They are the 9 (red line), 20 (green line), and the 50 (blue line) day Simple Moving Averages or SMA’s. I have also added Bollinger Bands or BB’s (yellow lines) and Candlesticks (the red and green bars with the wicks). These few technical indicators tell me 8-10 different characteristics about the market at a quick glance so I have them saved on my charts in MARKETHEAD, so they can populate a chart at the click of a mouse.
My favorite technical indicators show me that soybeans are in what I have coined a “SUPER-TREND” down that started on June 9th when the 9 day SMA (red line) crossed down and under the 20 day SMA (green line) as both indicators pointed sharply lower and the market traded below the 9 day SMA. This now makes the 9 day SMA the critical resistance area for the “SUPER-TREND” down to remain in full effect. Currently the market traded up to the 9 and held. We will see if it goes on to make new lows from here. I believe the 9 day SMA will hold and the market will go on to make new lows and the “SUPER-TREND” will remain in full effect.
The most important technical that I have added to this August soybean chart is the Royal Blue arrows that form what I call a Symmetrical Triangle. You should look it up. To me it is one of the most reliable indicators that I have found. Nothing works 100% of the time as we know, but I like this one. Not always, but typically Symmetrical Triangle formations come out of the formation in the direction of the trend before the Triangle was formed. Clearly in this case, the trend was down before the Symmetrical Triangle formed. So I expect the market to continue lower as we break out of his formation.
DAILY SOYBEAN CHART
Chart by ESIGNAL
MY CORN FUNDAMENTALS
Fundamentally, there is talk of China, flooding here in the U.S., weaker U.S. dollar index futures, and speculative short covering. For the most part it’s supportive stuff for the market. On the other hand, according to a Hightower Report today(June 25th), “Overall, we view the weather forecast for the US Corn Belt as bearish, but temperatures will be important to watch as we enter July as pollination begins across the growing region. Any pattern that suggests cooler evenings should trigger a bearish reaction by the trade.” I would like to add that NYMEX Crude Oil is very comfortable over $100/barrel and if that is not inflationary then I don’t know what is. Again these are supportive or bullish fundamentals for the corn market, except for the Hightower quote.
As the majority of the grain is in the ground it would seem to me to be a weather market, and we all know that Mother Nature can be vicious and beautifully amazing all in the same week. Things to look out for would be in my opinion, drought, floods, infestation, and disease for higher prices. If not then look out below in my view.
When Does Weather Matter: http://www.zaner.com/offers/?page=6&ap=mmckinne
MY CORN TECHNICALS
Technically, I have added my favorite technical indicators to this chart below. They are the 9 (red line), 20 (green line), and the 50 (blue line) day Simple Moving Averages or SMA’s. I’ve also added Bollinger Bands or BB’s (yellow lines) and Candlesticks (the red and green bars with the wicks). These few technical indicators tell me 8-10 different characteristics about the market at a quick glance so I have them saved on my charts in MARKETHEAD, so they can populate a chart at the click of a mouse.
These indicators don’t disappoint on this daily July corn chart below either. From a technical stand point the daily July corn chart is in what I refer to as a “SUPER-TREND” down. Why? Well here are the characteristics of what I have coined a “SUPER-TREND” down. They include the 9 and 20 day Simple Moving Averages (SMA’s). As the 9 day SMA (red line) crosses down and under the 20 day SMA (green line) as both indicators point lower on sharp angles AND the market trades below the 9 day SMA (red line) as it acts as resistance, then I see a “SUPER-TREND” down. We are now back in a “SUPER-TREND” down as the market is back below the 9 day SMA (redline). Even though on the 19th, 20th, and 21st the market rallied up to the 20 day SMA (green line) which held has resistance and was in an upward trend still, then we fell right back below the 9 day over the last couple of days.
So I’ve got the top line of the BB’s (yellow line) pointing lower on a sharp angle, the 50 day SMA (blue line) is also pointing down on a sharp angle , and so is the 20 day SMA (green line). The 9 day SMA is, pointing lower if only a little. So that is 4 out of my 5 indicators that are bearish leaving only the bottom line of the BB”s (yellow line) pointing up…barely.
I figured this out by going back and forth from a daily to a weekly chart by the click of a mouse which I found at: http://www.markethead.com/2.0/free_trial.asp?ap=mmckinne , which is a web application that we have developed for our clients called MARKETHEAD where I get about 85% of all my research from. That means I get both technical and fundamental research from this web app and I am a veteran series 3 Broker of 15 years. So if I’m using it then maybe my reader’s should check it out. Yes?
So these are just my favorite technical indicators and my opinion on what they tell me about this July corn market and when used on a consistent basis they tell me a lot on any chart and time frame. Remember nothing works 100% percent of the time and if they did then I would be on my private tropical island right now writing this commentary.
DAILY JULY CORN CHART
Chart by ESIGNAL
Some good plays I think could be to buy puts or put spreads with a call for a hedge or “insurance” in case the trend changes to up dramatically. I would recommend this a 3 to 1 ratio as always. Puts or put spreads give a limited risk and an in the case of outright put options, unlimited profit potential to zero for the price of the underlying future or commodity.
I believe this could be an opportunity, of course not without commensurate risk, to sell deep out of the money call options and collect premium. This is due to the current downward action or maybe the potential for future consolidation.
For exact details on strategies, months, expiration dates, strike prices, and number of positions feel free to contact me at 312-277-0115 or firstname.lastname@example.org .
It is also important to note that I am not married to a market, but to trends. So I make recommendations with options on futures and commodities like the energies, metals, currencies, softs, financials, and more.
25 Option Strategies: http://www.zaner.com/offers/?page=11&ap=mmckinne
FREE QUOTE- “If you wait to do everything until you’re sure it’s right, you’ll probably never do much of anything .” -Win Borden
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 ALREADY 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.
FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERDLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION’S STICKE PRICE COMPARES TO THE UNDERLYING FUTURE’S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT OPTIONS PRICES MAY ONLY MOVE A LITTLE.
THE LIMITED RISK CHARACTERISTIC OF OPTIONS REFERS TO LONG OPTIONS ONLY AND REFERS TO THE AMOUNT OF THE LOSS, WHICH IS DEFINED AS THE PREMIUM PAID ON THE OPTION(S) PLUS FEES.