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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 Soybeans Hedging & Trade Ideas for 5/2/13

May 03, 2013

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This report was sent to subscribers on 5/1/13 2:45 p.m. Chicago time to be used for trading on 5/2/13.

May Soybeans

After the close recap on 5/2/13: My resistance was 14.48 1/2, .05 3/4 from the actual high, and my pivot acted as support and was 14.39, .03 1/4 (only .00 1/2 in open outcry) from the actual low.

All charts and numbers for 5/3/13 have already been sent to subscribers at 2:00 pm.

May Soybeans      
                                     
                                 

14.67 ¾ FG                              
14.48 ½                        near 200 DMA       
------------14.39            Pivotal Downtrend Line            
14.29 ¼                                  
14.25                                            
                                           
5 day chart...         Up from last week same day                                                       
Daily chart   ....    Sideways               
Weekly chart ...   Down                          
Monthly chart ....Sideways     14.50 ¾ is the 200 DMA
ATR 26                                 Balanced 40%

 

 

 May chart is on the top, November chart is on the bottom. 

For 5/2/13: I continue to say "Bracket lines resist, and the downtrend line at $14.39 ½ is pivotal now". Daily numbers support. 

November Downtrend line at 12.39 is strong resistance; bracket lines at $12.02 ½ and 11.86 ½ are supports. Downtrend lines at $12.40 was $.00 ¼ from the high on Tuesday.  

In my May daily soybean numbers on Wednesday my pivot acted as resistance and was .01 ½ from the actual high, my support was .04 ¼ from the actual low. 

5/2/13: 

Grains: A week from Friday the USDA will issue its May crop report, and will estimate this year's crop yields. We will have a good working estimate to work with unless weather becomes extreme. Next week's weather will be a driver of perception for planting progress. The bulls want to see continued delays, and the bears want "open sky". Friday or Sunday night weather forecast will be the one the market will take its cues from. We take our cues when at a support we look to improve the upside, and at resistances we look to improve the downside, which many of my producers have done this week.

May soybeans plunged $.60 in 2 days giving back all but $.06 ¾ for the week. Market can go either way now, with no strong entry since we are on the high side of the middle of the bracket lines. Below the pivotal downtrend line I would rather be short; above it I would rather be long. Trading an extreme seems to be the hardest thing to do going against the market, but actually it is the easiest because it is the final level, easier than the levels before it.  

November soybeans actually are $.01 lower for the week. I think my producers who called in to capture old crop gains by raising the puts up to the call strike sold, and also lowered their November $12.20 or higher puts down to $11.80 or lower, taking advantage of the market's rally, all had the same thing to say even though I did not ask the question, they all said they think the market will come down greatly once planting gets underway. I agree. Some did some on the way up on Monday, more on Tuesday, and a little on Wednesday, but I would want to do as much as possible before Friday. I would capture the old crop by extending up the put, and I would lower my soybean protection down to at least $11.80 but protection down to the low of 2012 at $11.40 will probably be needed sooner rather than later.

Since I do not know what the market is thinking right now, I would day trade without bias and risk $.03 ½ in corn and $.06 in soybeans using a stop to protect any idea. I do not know if the market knows what it is thinking right now, I think they are trading the weather and perceptions of questionable fundamentals in their minds. I just want to take advantage of my numbers, and keep my eye on the charts longer term into the end of November when the December options expire.  

5/1/13:

Grains: Bracket lines were drawn last year and it is no surprise rather we expect that those lines would act as strong resistance, and once again they have. No surprise that November soybeans rallied to and "kissed" the downtrend line, and provided an excellent reward for risking little that the line would once again hold. You could have made enough that it would take the next 3 times at a line to fail to give it back. Risk little for possible nice gains, and an approach that has the trade idea of in this case "to sell it if it gets to the line" way before the possibility that we could even rally up to there. When the stocks report came out and May corn closed limit down, I said for whatever reason we could get near there it will be a place to get short, and do whatever you can to improve the downside. We just rallied $.57 off the low of last Wednesday and came $.02 ¼ from filling the gap at $6.95 ¼, so how hard was it to take that sell signal? No matter how bullish I would be (I am not) I would ALWAYS take a profit near there. The risk is much greater than the reward of it busting through a strong resistance. December corn came $.01 from the bracket line resistance at $5.71 and that line has been in place since last summer and was excellent support in January 2013, as well as it has been excellent resistance in March and April.

If you think for a minute that the way I use charts is coincidence, than you are wasting time and not taking advantage of the wisdom I am giving you. I did what you are doing (observation) for a couple of years and with many different markets even if I did not trade them but wanted to see if it was just grain charts or ALL charts. I could not believe something so easy is believable in the long run, but by the time I bought my membership in 1976 I was completely convinced. The next few years I refined what was most valuable, and how to trade a market if I knew the high and low (my numbers) for the day. One thing I learned was that the 3rd time at a line was the strongest time for the line to hold, as witnessed on the November chart at $12.40 on Tuesday. From the beginning and is still my approach, is to risk little on the "bet" that the lines (or gap) will hold. I learned no matter what my trade idea was even a "what if" weather bet, to never risk much to see if it will hold. If it is going to hold it will hold, if not, I do not need to lose another $.10 to $.30 to be convinced it did not hold.

99 out of 100 people are "afraid" that if they get out or stopped out, that the market would then go their way and they would have made "all this money". But most likely they will lose more money in a losing trade. Not making money is one thing, but losing money staying in a losing trade is another. I am never concerned what a market does once I am out, I worry about losing more money in a trade idea that I have a parameter to exit and do not. I know where I am wrong BEFORE I enter any trade idea, not I will see what happens after I enter a trade.

Trading the fundamentals, good luck with that, and trading weather forecasts are like trading the lottery, many more losers than winners, because even if you get the forecast right, you might not get the market reaction right or the aftermath. "Analysts" are happy to have this weather to analyze, they were running out of things to talk about, so the snail pace planting, and the cold wet weather giving them plenty of room for disagreement, and then the bulls can read what they want, and the bears can believe in and listen to who they want (I want you to think for yourself). Look at the drought areas a few months ago, and the calls for what production will be as a result, and then the cool wet weather now, and the debates on what the affect on production will be. Talk about a moving target! Do you really think that is a good way to make a bet? Does it give you a parameter for risk on the idea? Trading for me is not about what drives a market, trading should strictly be in entering a trade idea, having a place to exit if wrong, and an objective if right.   

I want to take the sell signals only today and risk $.03 ½ in corn and $.06 in soybeans using a stop to protect the idea. 

If you are a producer and want to learn from me "a better way to hedge", feel free to call me or email me and inquire. I will answer any question you have on futures or options on futures, and the services I provide. 

Want to know what I think for tomorrow and going forward?

The markets covered daily are Soybeans, Corn, and S&P's.

 

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Howard Tyllas

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Disclaimer:    No guarantee of any kind is implied or possible where projections of future conditions are tempted. Futures trading involve risk.In no event should the content of this be construed as an express or implied romise, 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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