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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 Soybeasns Daily Numbers & Trade Ideas for 12/1/09

Dec 01, 2009

 

This report was sent to subscribers on 11/30/09 6:00 p.m. Chicago time to be used for trading on 12/1/09. Everything is done by Howard Tyllas, no program or black box.

January Soybeans 

After the close on 12/1/09: My resistance  was 10.80, just .01 1/2 from the actual high, and my pivot acted as support and was 10.49, .03 1/2 from the actual low.

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10.80                                Resistance                            

10.69 1/4                                     

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

10.29                                Support at uptrend line

10.21

        1/2 way rule might be in play today

Trend             

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

Daily chart   …….…Down              

Weekly chart …….. Sideways      

Monthly chart ….... Sideways $9.59 is the 200 DMA

 ATR 25 1/2               Overbought 83%




I still say "Red bracket line near $10.50 is pivotal; downtrend line is now support near $10.12. Since downtrend line was hurdled the bulls hit their target of $10.68 but failed and created a "double top". 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". After this spike low was made, it warranted the adjustment of the steep uptrend line.

    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 Monday my resistance was $.01 1/4 from the actual high; my pivot acted as support and was $.02 from the actual low.

     January Soybeans for 12/1/09

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) 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.

Commodities in general: funds are known to buy the last few days of a month as well as the first 3 days of the new month. If they are not in the market buying the next 3 days, I do not think the money will inflow this month, and might even see some profit taking before year end. Then they can come into the new year buying with both hands if they want to, not hold what they got, window dress it into year end, and try to push it higher with only one strong hand, not two.

This is how I look at the chess board for now. I am not buying into the "buy commodities" at these levels, even though I think they could test their resistances like $80 crude, $10.68 soybeans and so on. I am watching the dollar because I know their (the funds) focus is on a bigger picture, longer term, and basically revolves around the dollar. I know I probably seem like a contra trend trader, but I would like nothing better than to be on the side of the fundamentals as well as on the side of the trend. But I have a problem being on the side of the trend without the fundamentals on my side at resistance (in this case) levels for longer than a day trade. There are also funds that act as "raiders" and will take advantage of technicals in a big way quickly, and get out quickly (a day or two).

Grains: I am taking any weather premium out of Argentina, but the excess rain in Brazil could spell trouble there, I will keep watching for us. There were only a handful of December corn deliveries that caught me as well as the trade floor by surprise. This caused the December to gain $.01 3/4 on the March, but did little to help rally the market.

I have the same thoughts as before, because what changed? Nothing. Price and time, market breathes, and I want to catch some of that at the point of inhale and exhale. Day trading the numbers has worked well lately, holding a long or short position is more or less spinning your wheels. It is easier to make $.50 $.10 at a time than $.50 on one move (for now). Put it like this, you know I feel the market fundamentally should be much lower than where we are now. I do not want to be right the fundamentals and wrong the market, but I would rather be right the market for all the wrong reasons. I want to sell longer term but the dollar action does not warrant that idea for now. That leaves me to day trade with a bearish bias. Will I buy it? Yes, but would rather take the sell signals and am more likely to trade a few more contracts on the short side.

The pivot could have been between the support and resistance at $10.59, but I felt it could produce a choppy pivot today and I want to avoid that action. I would rather buy the pivot support or sell the resistance number I am using, rather than using a $10.59 pivot and buying or selling against it. Can we trade using the $10.59, of course, but remember I want to be a casino, and I can intuitively and being "chart wise" strongly feel this is a choppy location today. I do not want to trade just to trade, so why trade a choppy pivot. THAT is the reason when you see numbers like what I am using in soybeans today no matter the market. It is to avoid a choppy pivot, and take a stronger signal at (in this case) the pivot (acting like support) or resistance.

I did well selling against $10.68 both in the night session and in open outcry. I bought back my short December corn at $3.98 1/2 on Sunday night. Please take note: when the market went above $10.68 late in the day by only $.01 1/4, and in a minute was trading below, this is the reason for my 5 minute rule. It means if you cannot trade above the resistance for more than 5 minutes, it is not facilitating trade and is just buy stops. I use a buy stop anyway because if they do facilitate trade above, I do not want to risk too much and see how wrong I can be. If the stop is not hit and still above my resistance for 5 minutes, I cancel the stop and just take a small loss. Wheat defies gravity and I shy away from trading this market for the last few years. I am flat (no position) grains right now.

Producers: Consider selling some upside on 2010 soybeans, this can be accomplished in a way that reflects your thoughts, but gives you let's say $.30 in the hand instead if $1.00 in the bush. Selling upside with a known margin $1 or more out of the money is a wise business decision that adds profits, and yes does not allow you more of that $1 than the $.30, but selling price areas that have only been traded once in history (2008) is to me always a casino bet to get 1 in the hand, the player must be right by 10% or more just to get close to the money he gave me, and then he gets his money back after that, and then it must go another $.30 to get an even money bet. He must be right $1.60 to get even money from me the producer or speculator. Of course this is in general, but your casino odds increase greatly if you have the margin money to work with. In options the old saying of "money makes money" is 100% true, and if interested you should email me or call. There are many strategies that can even get you long soybeans below, and at the same time sell them higher and still collect money.

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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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