This report was sent to subscribers on 2/22/11 2:20 p.m. Chicago time to be used for trading on 2/23/11. Everything is done by Howard Tyllas, no program or black box.
After the close recap on 2/23/11: My resistance was 13.13, .08 1/2 from the actual high, and my support was 12.83, just 0.01 3/4 from the actual low.
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12.83 near Key Uptrend Line
5 day chart... Down from last week same day
Daily chart .... Sideways
Weekly chart ... Up
Monthly chart Up $11.49 is the 200 DMA
ATR 36 ½ Extremely Oversold 1%
Bracket line is resistance, uptrend line supports, below there the December low and then the November low supports.
March Soybeans for 2/23/11
I said "If $13.50 goes, the next level of support is around $12.80, and then $12".
Grains: Spot on grain resistances, supports not helpful except in the night session when they were spot on too. Night session provided sell signals I wanted to take. I am proud I have insisted on my mindset regarding my approach to trading. You know it is all in the charts and the numbers I derive from them, not getting the fundamentals right. Since October the fundamentals were clearly bullish, but for me that has always just given me a bias to work with, but the charts have been bullish and numbers give me trade locations with clear parameters. I have warned for months about the funds huge position and when they want out for whatever their reason, we will come down hard. I think with the equities coming down it always causes "risk taking" to come off the board first and that are commodities. I said for 2/21/11 "No matter if early in the week or more probable after the AG Forum on Thursday and Friday, corn could rally to their resistance level of $7.31 (We got to $7.25 ¼). If corn can get to that level, I would sell any long I might still have on, and I would be getting short aggressively when nearing $7.XX. Not only would I have a contra trend short on in day and swing trade modes, but I would have known risk option strategies that would allow me to see if in fact we will pull back from that significant resistance level. I look at the +$7 area as a dangerous level to stay long at this point in time".
There was not much upside left, and I would not have risked more than what was left until my exit. I have said in many ways that in time we could go higher, and I did not expect these prices until after the March Intentions, but no matter the reason these are my strong resistance numbers and I would not be long near $7.31 and would have minimum hedge left to do. Whatever up and downside should be reflected in the strikes. I never risk $.15 to make $.07, but I will risk $.07 to make $.15, when at $7.25 that was the case. But in no way do I want to risk more than $.15 to make especially the last $.15. If I think I have an equal chance to get stopped out, I just get.
Nothing changed fundamentally, exports were really good, but who looks at that on a day the funds and speculators are in "get me out" mode. Hard to say when the funds will be done selling, when they are done, they are done. My uptrend line at $6.70 is the low tonight so far, and this is where we were trading on the close synthetically using options. Corn is sitting just above the uptrend line tonight, and if you wanted to buy I would use a $.04 sell stop to protect.
With my approach I risk $.04 in corn and $.07 in soybeans like today, and when the number holds I make money, when it does not I know my risk. There is nothing to think about, my thoughts are complete before I place an entry order, I have a target to take profits, and a stop to limit my loss. I NEVER care if I get stopped out on the high or low for the day, I care about losing more money in a losing trade than I should have, and that is a bad trade, not one that did not work. Since we are at support lines, I would use the numbers and trade without bias.
I did get a call and 2 emails from my producers telling me it felt good today knowing they are hedged, and they will keep an eye on buying more protection. I believe the Forum this Thursday and Friday will be bullish numbers, but the question is if we will be lower first and rally back to where we are now. And as I have said before, how much is it worth, charts are my guide, and we now have resistance numbers we know worked this time.
Grains: No trading on Monday but the numbers was for tonight and tomorrow's combined session as always. They would not change no matter if we were limit up or limit down or anywhere in between. In tonight's session as I write, soybeans traded past my first resistance number and the market stopped ½ way up to the second and final resistance for the day (and night). After that, the market broke and came down $.20 and stopped $.00 ¼ from my pivot support. We are now trading a few cents above the low now.
Corn opened $.01 ¾ above my pivot and rallied to $7.24 ¼ (new 2011 high) and that was $.01 below my first resistance number of $7.25 ¼ providing a sell signal risking $.04. After that the market broke down to below my pivot of $7.12 ¾ to $7.09 ¾. This means we have had nice opportunities no matter to buy or sell, using the numbers provided. There are many ways the numbers help you, like if you came in short and did not get out when the market opened above the pivot, and did not want to buy where you are supposed to be selling at the first resistance, you could have placed a buy stop just above the first or since the 2nd resistance was not far above you could have placed the buy stop just above there. Remember this would have been an overnight trade idea from Friday and a longer time frame than day trading, but when the resistance number held you could have waited and bought the pivot number to exit the trade or stay short with another chance. If you wanted to buy today and saw the market up so sharply, you could have placed an order to buy at the pivot and this time would have been filled, not like someone who wants to buy and would have entered the market higher because they did not have the parameters the numbers provide.
It is obvious why grains opened higher and shot higher into the resistance numbers, crude oil! It's up $7 now and only $1.50 off its high. Grains opened higher, rallied sharply, and then puked all their gains. After leaving the toilet and feeling better, they (the market) realized with crude oil up $7 it is prudent to be at least a little higher on the night. The first point I want to make is that I have always told you and want to remind you once again, "I do not care what drives the market to my numbers, I want to try and take advantage of that opportunity and exploit it". I do not care if China was buying, the funds are buying, the dollar is weak, the moon is full and it is a Tuesday, if they get to my resistance number I want to sell, and if they get to my support I want to buy. How I day trade it depends on the chart location and in this case when at 2 year highs, I trade a reduced contract size when taking the buys than what I take on the sells. The numbers DO NOT TELL YOU WHAT TO DO, they tell me what to do because I have already told you (numbers explanation) of how I approach trading my numbers, that's me, I am not trying to convince you to trade the way I do, I just want you to know what I do, and the how and why I do everything. I might be bullish and you are bearish, and we could both make money on our trade idea or we can both lose money on our trade idea, it depends on the time frame we are in, and how we trade it. I am in day trading mode but as in grains and the S&P I have been longer term bullish. I have cautioned about pressing the grains upside at this price at this point in time. The bottom line is that no matter day trade, or you only use the numbers when at a chart location that you want to enter or exit a trade idea, YOU are using the numbers to help you in the best possible location to do so that day. So much tonight for "ways to use the numbers".
Results for 2/18/11:
My soybean resistance was .03 ¼ from the actual high, my support was .13 ¼ from the actual low.
My corn resistance was .02 ¼ from the actual high; my support was .01 ½ from the actual low.
My nat gas resistance was .012 from the actual high; my support was .016 from the actual low.
My crude oil resistance was .11 from the actual high; my support was .16 from the actual low.
My 30 yr. bond resistance was 4 from the actual high; my support was 4 from the actual low.
My gold resistance was $2.10 from the actual high; my support was $2.60 from the actual low.
My S&P resistance was 3.75 from the actual high; my support was 4.25 from the actual low.
Grains: Spot on corn numbers, spot on soybean resistance but support was blown away. For the week corn posted gains of $.03 ¼, but soybeans lost $.48.
Last weekend I said and can say again for this coming week "Corn acted very well and posted a new high for the run and closed strongly. You know exactly what I think about corn and soybeans having spelled it out well this week. Soybean old crop was a burden to the market this week, and it is up to the funds as to what extent the liquidation will be while at record levels. My tilt is this; old crop soybeans will drag down the new crop until the old crop finds support. The spread will continue to narrow maybe another $.20 (it narrowed another $.10 on Friday) (lost another $.12 ½ the week ending 2/18). New crop corn daily this week became more profitable than soybeans to plant, and with higher corn prices underpins new crop soybeans which will eventually support old crop soybeans. Yes, maybe soybeans will pull back corn, but underlying strength in corn will soften the correction. If that is the case that corn will draw acres away from soybeans, new crop soybeans will fall short of forecasted production and will change their balance table for 2011/12 bullish. That, as well as it needs to compete with high priced cotton should support new crop soybeans. If soybeans lose acres, we could add another $1 to November futures from here" (would be $14.80 SX).
Old crop corn made a new 2011 high on Friday (new crop did not) but closed lower on the day which bodes well for another down day to follow on Tuesday (market is closed on Monday). The market managed to close the week slightly higher, but if it had closed lower for the week too, that would have been bearish. A retest of last week's corn low is in the cards if soybeans are lower, but if and whenever soybeans trade below $13.50, that should push corn bears to pursue the uptrend line that comes in near $6.70 this week. $12.80 soybeans should drag down corn to $6.40.
No matter if early in the week or more probable after the AG Forum on Thursday and Friday, corn could rally to their resistance level of $7.31. If corn can get to that level, I would sell any long I might still have on, and I would be getting short aggressively when nearing $7.--. Not only would I have a contra trend short on in day and swing trade modes, but I would have known risk option strategies that would allow me to see if in fact we will pull back from that significant resistance level. I look at the +$7 area as a dangerous level to stay long at this point in time.
I am still bullish corn longer term based on the current fundamentals. Current is the key because in time "current" becomes a thing of the past and fundamentals could remain the same or change dramatically in a short period of time. Look at the last page, on 10/11/10 I said "Talk about a surprise, I was again shocked when I read the numbers. This time the USDA took away 496 million bushels off of this year's corn production from their last month's estimate. They did add 258,000 acres to what they believe will be harvested, but with the yield being reduced 6.7 bushel per acre from 162.5 to 155.8, that was the biggest reduction in 31 years." March corn closed at $5.65 that day. The reason I point this out, is that fundamentals change no matter bullish or bearish. I already was convinced and forecasted successfully if spot month corn could get above $4.54 for whatever the reason, nothing was there to stop a price rise to $5.42. This 10/11/10 report lowering yield and production 496 million bushels was the reason I had stayed bullish from that day on, and I said that rationing was necessary and that meant higher prices from whatever price we were at the time. This is why I forecasted a target of $6.60 to $6.80 based upon the charts. The fundamentals might give you a clue as to what the price should be, but cannot tell you the price the pendulum can overshoot that "price value". In the case of grains in 2008 and 2011, that bullish swing could be dollars higher than what will become "fair value" at harvest or next year.
I look at any pullback in corn to still be a buying opportunity at key chart support areas. I will see what the Forum thinks about acreage (among other things) but know more is needed to take some pressure off of the tight stocks situation. SA could be accomplishing that now and although we are aware that things are improving there, we might still have some "price premium" built into corn until more is known. I think the AG Forum will produce friendly or bullish numbers for corn. Even though I think corn will work lower if for no other reason weakness from soybeans and wheat, I think we will not see a major break before the March 31st Planting Intentions Report.
The reason I tell my producers to hedge here as well as speculators to take profits and reduce positions, or have some kind of risk strategy in place, is that to me it does not matter what got grains to this level, I want to take the advantage of the chart location. If hedged enough, or have a small position as a speculator, if they go higher you make money, and if they go down you are in a position to now enter a new position. It was pretty clear in October that we should go higher, but how high is high, $.20, $.50, and that is a part of this "game of chance".
I want to adjust my corn call position a little more bullish when the market comes down to a support level, but unless fully hedged I would not do this. If you have hedged only 75% of your crop let's say of 40 contracts, that means you are long 10 contracts or $500 a $.01 or $50,000 for a $1 move. To me, the producers look at it as the same 10 that they are usually long at this time of the year, but what they must realize is that we are at $6+ December corn, not $4. Looking at $6 and locking in $6 is two different things. As long as you realize the gamble (hedge or spec) and you are comfortable with your wager, I certainly have no problem with that. Going forward if we see more acres than thought planted and a bumper crop, we could easily see a $2 or $3 drawdown from here, or poor weather and low yields and less harvested acres than thought, we could see prices skyrocket to nosebleed levels. The upside will never be a problem to the bulls, but the downside can bankrupt them. So the more you are hedged the more you can adjust your position and get some upside cheaply when the market is down. With the minimum amount of put protection already taken it is hard to XXX at this time. What I would like to do is ... Subscribe now!. I have done well to remain bullish until $7, and as I have said before, I am cautious at this price level and I want to stand aside until the market rallies to my resistance or breaks to my support ($.-- either way from here), and I would just day trade only until then.
Corn chart is SUBSCRIBE!
Soybean chart is Subscribe!
Because we are at lofty levels and corn did have a sell signal resulting from Friday's action, I want to trade the corn numbers and take the sell signal only today and risk $.04 using a buy stop to protect. Since we are nearing crucial support in soybeans and we are trading spot on chart wise (I was using $13.57 FG since we have been above there as support, and was the exact low for last week), I want to trade the soybeans numbers without bias today and risk $.07 on any trade idea using a stop to protect.
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