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Hedging Corn and Soybeans

RSS By: Howard Tyllas, AgWeb.com

Howard Tyllas is currently a member of the Chicago Board of Trade and registered with the Commodity Futures Trading Commission as a floor broker and as a Commodity Trading Advisor.

January Soybeans Daily Numbers & Trade Ideas for 11/20/09

Nov 20, 2009

 

This report was sent to subscribers on 11/19/09 5:40 p.m. Chicago time to be used for trading on 11/20/09. Everything is done by Howard Tyllas, no program or black box.

January Soybeans

At 12:15pm on 11/20/09: My pivot acted as resistance and was 10.50, the EXACT actual high, and my support was 10.30, just .01 1/2 from the actual low.

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10.80                                Resistance                            

10.68                                     

-------------10.49               Pivot  

10.30                         

10.11 3/4                          

 

Trend             

5 day chart.……….. Up   (from last week same day)                                                 

Daily chart   …….…Down              

Weekly chart …….. Sideways      

Monthly chart ….... Sideways $9.56 is the 200 DMA

 ATR 27 1/2              Overbought 89%




 

I continue to say "Red bracket line near $10.45 is resistance; downtrend line is now support near $10.12. Downtrend line was hurdled and bulls now target red bracket line (again)."

    Many reasons this year for the swings in price. Bottom line: Bracket lines are areas that correspond with news events. Green are when crops look good, red when the crops do not, or are delayed, aided by demand. 

    I have always said, "I do not care what the reason the market gets to a location on my chart that presents a trade opportunity".

   In my daily numbers on Thursday my resistance was $.00 1/4 from the actual high; my support was $.04 1/4 from the actual low.  Actual low in open outcry was 10.24 just .00 1/4 from my pivot support. You had four 5 minute bars when it traded 10.24 in the first 25 minutes.

January Soybeans for 11/20/09

More chart comments:

Objective was met on Wednesday posting a $.46 rally from Tuesdays low. Red bracket line not only provided a good place to take profits (exit), but gave a good location if you wanted to sell. Patience to wait for good locations to enter a trade will reward you by providing minimum loss if wrong, and more profit if right. You might miss trades (some glad you did) and not be as active, but this type of trading makes you a casino, not a player. These locations are also valuable to the day trader that can use (in this case) the red bracket line to be a seller and have a stronger resistance backing you, hence easier to sell than when in the middle of bracket support and resistance lines.

Grains: Spot on numbers! The USDA also announced a sale of 116,000 tonnes of soybeans to China for 2009/10 this morning and this was considered supportive. This sale is in additional to a higher than expected export sales number on this morning's USDA report. Net soybean sales were 1,349,700 tonnes. Traders had been expecting total soybean sales of less than 1.0 million. Nearly 725,000 tonnes of this week's sales were to China with over 142,000 to Mexico. As of November 12, cumulative soybean sales stand at 73.3% of the USDA forecast for 2009/2010 even farther above the 5 year average than last week. That average stands at 49.0%. Sales need to average just 227,000 tonnes in soybeans each week to reach the USDA forecast.

That was the excuse to open $.08 higher than where they closed electronically before the report was released. If you look at the 5 minute bar chart you will see that the market traded in 4 bars at 9:30, 9:35, 9:40, and 9:50 all with the same low of 10.24. My pivot of 10.23 3/4 after 5 minutes acts as support and was only .00 1/4 from the actual low in open outcry. I do not have time to look at all the markets I cover and see results on a 5 minute bar, but I was active trading soybeans today using my numbers and watching the 5 minute bar.

I sold soybeans at $10.46, took some small profits on some and kept one for a longer term trade. Again, if in day trading mode I would do better by covering on the close at $10.39, and the market gave me another chance to sell against my pivot resistance of 10.49 tonight since the market did take out the buy stops in thin trade and posted a high of $10.50, 10.44 last. You could say I might have missed something if they opened lower and did not look back, but remember I want to be in day trading mode thinking I can take out $.10 five times, and that would be easier than one $.50 move at this time.  It is this market at this time that I plan a strategy based on the best approach at this time. Tomorrow I could take home this short and turn into a small swing trade as well as to continue to day trade.

Yes, I would like to have more time to trade, but I am getting better at trading and doing this service at night, and talking on the phone and trading in the day session. It is like the first couple of years trading and trying to stay unemotional trying to execute whatever I was supposed to do without question or second thought. Leave the second thought in play though if your intuitiveness pays off. If you get off your plan because you "feel" or "think" (intuition), I will tell you to keep a daily journal and write down the results, otherwise when you think back a week or two you will be like a fisherman and would have more than you really did, or lost less. Keep it real. When my intuitiveness is going well I will keep it in play, but if not end it quickly. The journal helps that. The bottom line for me is that I never go against my numbers, never, but I use it to help take a profit short of the number, or get aggressive, or take a trade or not. I want to almost always take the trades at the lines though.    

I called it right last weekend (11/16) thinking corn would gravitate around $4 on expiration today. This will be like a report day if they go off the board within $.03 of $4 because the powerful funds could be setting the market up for a big surprise one way or the other. They have done this many times before and I feel this time it is ripe for that type of action. Let's say corn closes at $4.02. The $4 calls are exercised and they are now long futures at $4.00, and the $4 puts expire worthless, right? Wrong! Let's say the funds are long 8000 $4 puts, all they need to do is call their clearing firm and announce that they want to exercise their puts anyway. They can do this after the close of trading Friday. Now they are short 8000 futures at $4 and on Sunday night they offer 5000 more at let's say $3.98 on the opening and could sell 5000 that night.  When you get notified that you the seller of the put was exercised would make you long at $4 and you thought you had no position. Now you must sell because you did not want a position or even worse you wanted to go short, the pain begins! This scenario can be played in different ways but that is what I think will happen, a surprise up or down and I have no idea what it will be.  

I probably will go home with no position but if they breakdown and I am still short, I might take it home. Lastly, the SF/SX exploded this week to SF +20 over the SX; I got out the other day at +4. If I was bullish I could have stayed but I was not. Note: It is really slow when there is 2 cents between the bid and offer in the spot month SF, usually 1 cent at the most, and a 2 contract bid and offer. Almost no volume has traders leery of tomorrow's trade.

Want to know what I think for tomorrow?   

The 9 markets now covered daily are January soybeans, December corn, December crude oil, December S&P, December Euro FX, December 30 yr TBond, December gold, December natural gas, and December cattle.

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           May Your Next Trade Be The Best                          

                     Howard Tyllas            

   Tel.1-312-573-2699, 1-312-961-4390



Disclaimer:     No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures trading involve risk. In no event should the content of this be construed as an express or implied promise, guarantee or implication by or from Howard Tyllas, that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.

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