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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.

December Corn & November Soybean Daily Numbers & Trade Ideas for 11/1/10

Nov 01, 2010

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This report was sent to subscribers on 10/31/10 11:30 p.m. Chicago time to be used for trading on 11/1/10. Everything is done by Howard Tyllas, no program or black box. December Corn & November Soybeans for 11/1/10:

After the close recap on 11/1/10: My resistance was 5.88, .02 3/4 from the actual high, and my pivot acted as support was 5.74 3/4, .02 3/4 from the actual low.

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All charts and numbers for 11/2/10 have already been sent to subscribers at 5:20 pm. 

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december corn 11 1 10

 

I continue to say "Post report high of $5.88 is resistance, and $6.08 3/4 is my key resistance. Recent lows support.

December Corn for 11/1/10:

Average trading range is $.17, but in order to use the recent high of $5.88 as resistance, I needed to use the closest support number. I look for the first support, pivot, or first resistance to be the high or low of the day.

In my daily corn numbers on Friday; my resistance was .05 from the actual high; my support was .03 from the actual low.  

New Subscribers:  Keep in mind that these are day trading numbers. They are equally to be used for swing trading and longer term trading time frames on the day I want to enter or exit my position. The charts are to be used for overall trade location looking for areas of price discovery of support and resistance levels. When the market does go to the charts longer term support or resistance levels such as bracket lines or longer term trend lines, I use my numbers on that day to enter or exit my position. The numbers do not tell you what to do, you are in control of that, but they will give you a framework to try and buy or sell at the best price for that day. For me it gives me a strategy and the best way I have found to discover the best price for entering or exiting my trade ideas.

If I have the exact numbers for the actual high and low of the day 12 hours in advance, the question has always been, how do I trade it? That is what I best describe in my numbers explanation. Any intuitiveness or nuances I trade, I would keep a journal to see if it is worthwhile overriding my plan. I rarely go against my explanation.

November Soybeans

 

november soybeans 11 1 10

I continue to say "Bull chart continues as long as the bracket line holds at $11.65, and key support from the gap at 11.28 1/4. Resistances are now found on the weekly continuation chart".

November Soybeans for 11/1/10:

I continue to say "Market needs to hurdle $12.23 1/2 to further the run higher". That was accomplished on Friday, now the market faces strong resistance at the bracket line near the gap of $12.43.

In my daily soybean numbers on Friday; my pivot acted as resistance and was .03 1/2 from the actual high; my support was .10 1/4 from the  actual low.  

Grains: Spot on to accurate grain numbers. New high closes in both soybeans and corn are encouraging, the charts point higher with only the recent high of $5.88 in December corn, and the bracket line and gap at $12.43 in November soybeans to hold them back.

A week from Tuesday we will get the USDA's latest, and I am interested what they will not only do with their production numbers, but the ethanol grind is what I think can lower the carryout and continue the bull market to a higher level. The downside for corn is a slow export pace, while soybean exports are at the highs for this marketing year. Higher production numbers, slowing exports, less usage, and something that causes the funds to want to liquidate much of their position, is the risk the bulls have. Nothing is certain and this is the year of surprises, so anything can happen. Like most of the reports, I do not want to have a position going into it at these price levels, unless I use a known risk strategy.

This week will feature trade guesses and position adjusting. Corn still faces the high of 2 weeks ago at $5.88 that should be hurdled if soybeans are above the bracket line and gap of $12.43 strong resistance. Above there is $6 with $6.08 3/4 being strong resistance. As I have said before, if we close above there a couple of days, the next big resistance is at $6.80. Corn gained $.22 last week, but the next $.22 will take us near strong resistance and will not be as easy. Above $12.43, soybeans will target the high of the front month contract in 2009 at $12.91 1/4 made in June. Corn should be at $6.08 if soybeans make it there.

Depending on the report being bullish, soybeans might gain on corn and be testing their next resistance trying to fill the gap at $13.32 left since August 2008. $14.90 let alone the all time high on the front month continuation chart reminds us that $16.63 was posted in July 2008.  Corn's high was posted in June of 2008 at $7.65. But by December 2008 it traded $2.90, while soybeans traded under $7.80. If we get a bearish report, $1 could come away from the current price quickly.

I want to day trade without bias today, but would trade minimum contract size on the buy signals. I would risk $.05 in corn and $.07 in soybeans on any trade idea. I have a hard time no matter the name on the chart to be pressing the upside at historic levels for longer than a day trade. After the report and if carryout is bullish enough, I would find it easier to play the long side looking for much higher prices. I will not bet the report shows that, but I will cheerlead for that result. The mere fact that I am mentioning what the all time high prices were, and the possibility of even just maintaining the current levels amazes me, and at the same time we are having one of the best crops ever.

Producers: 2011 crops are expensive as well I guess should be at these price levels. When you can lock in $1 protection for $.25 to .35 at these levels, it makes sense rather than if we were at $4 corn and $8 soybeans. If that $1 down is not needed and if they can go $1 higher, you are looking at not only a record price (for most) on the original hedge but you will have your crop back too! If we did have a shortfall in production next year and you can see that you are affected, then you need not do anything and the hedge is limited to ... SUBSCRIBE NOW! I look at it this way, I would rather pay $.35 for $1 protection down from this level, than get a $1 for free at the $4.50 level. I look at this as a business, I am not worried what costs are involved, I am worried about making money and keeping it. I do not want to be penny wise and dollar foolish. I do not want to gamble with my business more than I have to with the risk just being in business, gambling with my profits is something I try to limit. I want to lock in profits as I pursue more, so if the more does not come, I have kept the rest of my income.

 

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           May Your Next Trade Be The Best                          

                     Howard Tyllas            

BT  

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.

 

 

 

 

12.65 1/2                             

12.43 FG               

--------------12.23 1/2       Pivot

12.04

11.99 XX

    Use same numbers as on 10/ 26 through 29 /10

Trend            

5 day chart...       Up from last week same day                                                

Daily chart   ....  Up                     

Weekly chart ... Up             

Monthly chart    Sideways   $9.81 1/4 is the 200 DMA

ATR 23 1/2         Overbought 84%  

 

6.00

5.88

------------- 5.81 1/2         Pivot

5.74 3/4

5.68         

5.61 1/2         

Trend                                   

5 day chart........       Up from last week same day                                                                                                                                                   

Daily chart   ......     Up                       

Weekly chart .......  Up            

Monthly chart ....    Up 4.19 is the 200 day ma

ATR 17                      Overbought 92%     

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