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The Ted Spread

RSS By: Ted Seifried, AgWeb.com

Ted is the Chief Market Strategist and Vice President in charge of the Zaner Ag Hedge Group and specializes in agricultural hedging employing various strategies using futures, futures spreads, outright options and option combinations. He believes it is paramount to be able to use different strategies to adapt to market conditions. Ted works with large to mid size grain and livestock producers and end users in North, Central and South America.

Grains Holding Support For Now

Dec 04, 2012

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.   

Last week corn and wheat failed to break key resistance at their respective 100-day moving averages and early this week have come down to test support.  For now key support levels are holding in corn, wheat and soybeans.  However, spreads in the grains were showing a bear market mentality even as markets bounced off lows.  This could be an indicator of a better test of support on the way and maybe even more downside potential to follow.

Technically corn is stuck in a range between key support at the 20-day moving average (744) and key resistance at the 100-day moving average (769).  At some point, and I think relatively soon, corn will break out in one direction or another.  Export, ethanol and feed demand for corn are very poor at this time which could hint at lower prices.  After all, it is difficult to get excited about a tight supply when there is no demand.  But demand may need to be sparked in a different way.  It certainly could be the case that the threat of higher prices works better to encourage buying then lower prices.

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Soybeans are technically still in a downtrend and attempting to follow through on what is for now a technical bounce.  Soybeans have a long way to go to turn the trend to up.  There was need to alleviate the oversold condition of the market.  Fundamentally soybeans have another 2-3 months to enjoy strong export demand.  South America has the potential for a massive crop and it that comes to fruition then US soybeans will not be competitive in the global market at these prices.

Wheat has a bit of a bullish weather market going on here in the US.  However, the chart looks sloppy and sideways.  The weather situation certainly needs to be watched but prices will likely follow corn and soybeans.

CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie

Outside markets continue to be a factor.  It seems markets move whenever anybody farts in Washington.  I feel that the fiscal cliff will get resolved and that although markets may embrace that at first glance the hard truth of the matter is that we will have had to give up much too much to make it happen.  Either way the economy gets hurt and in my mind its really just a question of how bad.

March Corn Daily chart:

January Soybeans Daily chart:

March Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices while we have new crop corn above $7.00 and new crop soybeans above $15.00. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

Please check out my Blog at: http://tedseifriedfutures.com/

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=Seifried

Futures, options and forex trading is speculative in nature and involves substantial risk of loss.  This commentary should be conveyed as a solicitation for entry into derivitives transactions.  All known news and events have already been factored into the price of the underlying commodities discussed.  The limited risk characteristic of options refers to long options only; and refers to the amount of the loss, which is defined as premium paid on the option(s) plus commissions.

FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION

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