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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.

May Corn Daily Numbers & Trade Ideas for 3/17/11

Mar 18, 2011

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This report was sent to subscribers on 3/16/11 6:10 p.m. Chicago time to be used for trading on 3/17/11. Everything is done by Howard Tyllas, no program or black box.

May Corn

After the close recap on 3/17/11: My resistance was 6.47 3/4, .01 from the actual high, and my pivot acted as support and was 6.19, .03 from the actual low.

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All charts and numbers for 3/18/11 have already been sent to subscribers at 3:40 pm. 

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6.47 ¾                         near crisscross resistance     

6.34 ¼                              

------------- 6.19           Pivot

6.03 ¾ FG                             

5.88 ¼                               

 

Trend                      

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

Daily chart   ......   Down  

Weekly chart .......Up

Monthly chart ....  Up           5.44 is the 200 DMA

ATR 25                                   EX. Oversold 6%

corn 3 17 11

 

Steep downtrend line coupled with the blue uptrend line is resistance at $6.48. $6.36 ½ is where May corn settled on 12/31/2010. 

May Corn for 3/17/11:

Uptrend line is support which comes in at $6.95 for the May contract this week of 3/7/11.

In my daily corn numbers on Wednesday; my resistance was .10 ¼ from the actual high; my support was .04 ¼ from the actual low.  

3/17/11:

Grains: Grain supports were spot on, resistance numbers were helpful. Market reporters are happy to have so much news and information to write stories of why the markets did what they did, and of course written during or after the close. Ok, so you know all this information, how did that help you today, and how will that information help you tomorrow to form a plan that tells you when to buy and also when to sell, and in what time frame, and what to risk in order to pursue the gains? Being a floor trader standing in the pit trading for my own account, do you really think the fundamentals did anything more than have a bias at best? When the market goes up and down throughout the day, now what do you think the fundamentals did for me in the way of discovering at what price I want to do what, and why? "I never want to be right the fundamentals and wrong the market, I would rather be right the market for all the wrong reasons", I always say. That is why I have always used a daily bar chart and supplement with a 5 minute chart to get my daily numbers.

At times I need to use the weekly and monthly charts. I use these chart areas to get my trade ideas, and as you know I always use a stop to try and keep losses at a minimum, and use chart locations that if the number holds, a good reward is possible. I never press my lines (meaning I think they will not hold and will be broken) and believe they hold more than they do not, and instead of being skittish trying to buy (in today's case), I just trade a reduced size. When I swing trade I might not allow much more room than I do for a day trade for my stop, and sometimes using the second number for a stop, and will manage it in time keeping the risk in relation to the reward I seek.    

May corn held their "gap support" at the 2011 low and provides a buying opportunity for traders. I would have traded only a small amount because of the quick huge losses, but I would always want to buy a gap support no matter if to cover shorts, get long, or both. If May corn can reach their downtrend line that comes in at $6.48, which would be a selling opportunity. Bulls need to recapture the major uptrend line (closing above) in order to regain control. Notice how the high on Wednesday was exactly the uptrend line. The market was higher yet the bulls were unable to recapture the uptrend line (finding sellers there) and the bears were on to test the low of the year. Closing $.08 off their low indicates possible exhaustion in the sell action. Market is higher tonight confirming the support was strong as expected. The market can do anything, and that includes going to the uptrend line again, failing, and the bears will want to retest the low once again.    

December corn chart provided the exact low of the day on Wednesday, and another example of the power of a trend line. May corn major uptrend line finally failed, but the December uptrend line continues to hold for now. I think we are at the bottom of the value area before the report no matter the fundamentals, unless a further breakdown in assuming risk occurs. This is another example of markets can and will do anything. Fundamentals do nothing in helping you participate in this major league gambling arena. It does not give you a plan, how to manage risk and time, or really do anything except maybe planting a "sucker bet" in your mind. $5.70 to $5.80 should be good resistance the remainder of this week.

May soybean pendulum hit the end of its swing on Wednesday, and is swinging back to the upside now. Downtrend line coupled with the major uptrend line provides strong resistance at $13.22. Support is the gap left from Tuesday at $12.70. As in corn I think we are nearing a value area in soybeans until the report on the 31st. 

November soybean chart continues to hold its major uptrend line just as new crop corn chart has. The new crop charts are what is supporting old crop from further loss at this time. Uptrend line provides a place to take profits on shorts, and a contra trend trade buy signal, which I would trade with a smaller contract size. My stop on a long term swing trade looking for $12.90, I would use a sell stop below the last uptrend line at $12.18 to protect from further losses. Known risk strategies will not only manage your risk, but allow you the time to see if your trade idea will work without risk of being stopped out. Downtrend line crisscrosses with steep uptrend line at $12.95 providing strong resistance.

I want to trade both markets without bias using the numbers, and risk $.05 in corn and $.08 in soybeans using a stop to protect.   

3/16/11:

Grains: Spot on corn numbers, spot on soybeans resistance and support was no help. I have said for years in my service and always have a reminder, when the funds want out, the market will experience a sharp drawdown. Trying to sell corn when the funds are liquidating is like trying to sell sand at the beach. There are 2 factors that are bigger than the market, Mother Nature and the funds. Funds holding twice the amount of the entire corn carryout speak for itself. If the store is closing in 3 days and you must liquidate your inventory, what happens? The first day you reduce the price to where it will attract buyers. Depending on how well the price reduced inventory, and the time left to exit, a decision is made as to how much to reduce the price. The second day if successful has liquidated dramatically inventory and if so the little remaining can be reduced slightly. But if the second day did not go well, it is usually announced that every hour until closing on the 3rd day that prices will be reduced to sold. This is the task of the funds have when trying to move inventory in a short period of time. When the funds allocate funds, they execute what they want to do at the time they do it, and their reason does not matter to me. They sold 40,000 contracts today which bring their 5 day total to 94,000 contracts. Their position is still at historic levels.

Do you really want to hear about the fundamentals? I did not think so, and it could wait until the weekend for further recap going into the report. May Corn chart for May broke their major uptrend line and now becomes strong resistance at $5.48 today. May corn has support at $6.14, and then "Custer's Last Stand" at the gap at $6.03 ¾, below there something is really wrong with the market, or the funds continued to liquidate.

December Corn is at $5.45, exactly on the uptrend line tonight and is pivotal going forward. $5.36 and then $5.23 should find good support before the report. I use the numbers to find resistance because there is no real resistance until $5.80 and that would be a gift to sell on the current chart look. I would not sell corn here at the line, but further breakdown below would make me want more protection down to $5.20 to $5. I would roll down puts or I would use intrinsic put spreads for new hedges and help pay for them selling some upside (of your choice). (December corn chart on page 4)    

May Soybean chart supports have not changed, and the only thing encouraging is the market gapped higher and is holding, if we can close above there and leave the gap intact, that would bode well for another up day to follow, especially if they close near their high for the day. $13.20 is the major uptrend line and it now acts as strong resistance. Bracket line at $13.54 is next resistance.

November Soybean chart held their second uptrend line after giving up the first at $12.90 which now becomes resistance. Gap higher open is encouraging, but depending on today's action that will be recorded on the chart will paint more of a picture. Predicting further fund liquidation is impossible to predict. Charts are the only clue (and a big one) that I use to predict the possible support and resistance NO MATTER THE REASON and try to take advantage of the pendulum swing by having a trade idea based on the chart that allows me to risk a little if wrong, and have a nice reward when the number holds. Support is just under Tuesday's low, and the major trend line comes in this week at $12.20, and a place where I believe ALL my producers are covered down to (or below) and unless that is broken, I would not want to roll down considering the cost are very expensive.

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I want to trade the numbers without bias today and risk $.05 in corn and $.08 in soybeans on any trade idea using a stop to protect. This is the second day in the last 10 trading days that I would attempt a buy, but same as the last time, I want to have a minimum contract size on the buy signals, and not many more on the sell ideas seeing as how may soybeans have collapsed $1.50 on this recovery rally, and over $1.90 from the high of the year which exceeds the November break by more than $.20. May corn has plummeted over $1.10 since the high on 3/4/11, which has exceeded the November break by $.15.

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

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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.

 

 

 

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