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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 12/2/09

Dec 02, 2009

 

This report was sent to subscribers on 12/1/09 6:00 p.m. Chicago time to be used for trading on 12/2/09. Everything is done by Howard Tyllas, no program or black box.

January Soybeans

After the close on 12/1/09: My pivot acted as resistance and was 10.64 1/2 the EXACT actual high, and my support was 10.29, .03 1/4 from the actual low.

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10.80 XX                         Resistance                            

-------------10.64 1/2        Pivot  

10.49                               

10.29                               

       

Trend             

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

Daily chart   …….…Down              

Weekly chart …….. Sideways      

Monthly chart ….... Sideways $9.60 is the 200 DMA

 ATR 25 1/2               Overbought 69%


Since downtrend line was hurdled the bulls hit their target of $10.68 but failed and created a "double top", then the pullback, then the extension to the next and more significant "double top" and failed a second time. As I said before "I consider this a key reversal, but lately the funds have come back to negate this signal, so I consider the action bearish but not as strong as usual". 

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 Tuesday my resistance was $.01 1/2 from the actual high; my pivot acted as support and was $.03 1/2 from the actual low.

January Soybeans for 12/2/09

More chart comments: After you have seen this type of rejection at a high ($10.68) after rallying $1.14 in less than 2 weeks (almost a 10% gain) you will get the confidence that I have had for decades in taking trades at this type of location. When you look at the times it works versus the times you will get stopped out, and the amount gained when right versus the amount lost when wrong (does not hold) you see how I look at this trade as me being the casino getting the odds versus the player who gives up the odds.

 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 (or the high of $10.68 or $10.80) 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 in soybeans. Fund scenario before the grain open outcry open of a weak dollar and resumption of first of the month buying propelled soybeans higher with corn being dragged along for the ride. Corn bulls were disappointed in the fact that the government has postponed a decision of a higher ethanol blend until spring 2010. The proposal for more usage was based upon projections of gasoline use which is in reality decreasing and not increasing. The higher blend rate would have picked up the slack, but the concern I had when it was proposed was the ability for current production cars would be able to run on the blend without damage to the engines. This is what they want more information about before going further.

Soybeans rallied to my number that you have been looking at for some time ($10.80). The lower close after making a new high for the run is bearish, but as I said last week when the same thing happened, I warned that I felt the funds could easily override this technical signal, not this time though. Unless there is a further dollar collapse, I cannot make a case for the upside from this current level. Can they go up? Of course, I have learned markets can and will do anything and everything, but I have also learned that it is prudent to always have a risk strategy to take you out of the market when wrong and have it remain a trade that did not work, rather than to "think" or give reason why the market will not do this or that and risk more on a losing trade, because if wrong then, you gave away your control, become emotional, and wind up losing more than you were willing to make, in other words a gambler who cannot walk away until broke and forced to. The casino I try to always be knows when the odds are not in their favor, does not try to win every bet, and does not try to get back their losses all at once if a player (the market) got lucky and took away some of our money.

Bottom Line: Weak dollar producing across the board commodity buying is the only factor I see for grains to rally from here. Charts are still bullish, but looking "toppy" to me. Corn bracket line resistance is holding let alone the highs nearby at $4.25. The funds provide opportunities and prices no matter high or low that I continue to want to exploit. I do that through my charts and daily numbers on any given trade day. End users and producers should remain focused on profits not furthering a gamble for further gain without at least protection if the price gets away from them. 

Soybeans $10.80 is going to be a hard wall to breakdown, then the bulls are facing the high in the summer when the perception that the crop was floating away and posted $11.05. As long as $10.12 holds I think we will be range bound $11.05 to $10.12. Corn has looked weak lately, and the thoughts I have had about this market are surprising to see this market at this level at this time.

I had little time to trade but I did take a limit order to sell SF at $10.78 and took out $.08 before I had to stop trading for the rest of the day. These are only trades to me. I really do not care where prices are now, or where they will be, but I am always cheering for higher grain prices for our farmers and lower energy costs for all of us. High grain prices/lower crude is my lifelong "home team" and I will always cheer for that. My guess for the corn in your cereal box cost about as much as $.05 more for every $1 corn goes up, yes meat goes up too, but I remember paying $5 for a gallon of gas last year. The $1.00 stays here on the farm; you know where most of our crude oil money goes.

 

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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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