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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.

November Soybeans Daily Numbers & Trade Ideas for 9/13/12

Sep 14, 2012

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This report was sent to subscribers on 9/12/12 3:30 p.m. Chicago time to be used for trading on 9/13/12.

November Soybeans

After the close recap on 9/13/12: My pivot acted as resistance and was $17.50 the EXACT actual high, and my support was 17.30 1/4, .02 1/2 from the actual low.

All charts and numbers for 8/14/12 have already been sent to subscribers at 4.00 pm.

November Soybeans


17.89 All Time High
17.69 ¾
-----------17.50 Pivot
17.30 ¼
16.21 Uptrend Line Support
16.93 ¾
5 day chart... Down from last week same day
Daily chart .... Up
Weekly chart ... Up
Monthly chart ....Up 13.70 is the 200 DMA
ATR 35 Balanced 55%

 

For 9/13/12: 2012 high resists, the daily numbers support.

In my daily November soybean numbers on Wednesday my resistance was .02 from the actual high, my support was .12 ½ from the actual low.


9/13/12:

Grains: "I am more concerned how the market acts to a report than the report itself", and the markets did act according to what the USDA implied, bullish beans bearish corn. Price action was more than interesting before and just after the report release, market running $.10 up and down in a few seconds, and evoked emotional trading. When you have price orders with stops working prior to the report, and if the numbers are good, it is like catching fish in a bucket.

Soybeans traded $.07 higher and corn a few cents lower 30 minutes after the report, and it looked like the soybean market was being held down by corn, and corn looked like it might be dragged higher by soybeans. That is what the price action was telling me, but I only listen to one thing, my NUMBERS. Corn went to my resistance number first, and then back down to my support within 10 minutes, and then rallied to my pivot. Soybeans went from my first resistance to below the pivot and then went $.02 from my second resistance. Price orders before the report and using stops, just taking the buys if I am bullish, taking the sells if I am bearish, and having a buy order using a sell stop to protect also having an order to sell and have a buy stop if I am without bias. In these cases you might have been filled on both your buy order and sell order and needed only to cancel the stops.

Now that we have some FRESH numbers to work with, the production is still unknown but the report deflates the bulls yield hopes significantly even if further reductions are made, and so the market has no choice but to trade technically like it or not. Soybeans posted a big day and look set to make a new high, but I look at it as soybeans are only up a few cents on the week and need to make new all time highs before I get off of my predictions that "the highs are in for the year". Corn is easy to say that now, soybeans though I might be the only one. If I am wrong I will be stopped out, if the market comes down $1 though, what is the bull's plan to exit?

Once again you see what I am talking about when I say that I do not like to be on the same side of a fund and speculative position when their positions are huge, because I know when they liquidate it goes the other way "big time". Now December corn settled $.80 below the high, and $.30 from my gap support of $7.40 ¼, $6.75 would be the next strong support. So what is the bull's plan now? They all easily recommended buying corn looking for $10, but have they sold out yet or still hold their position like the funds, holding a position with other people's money, and do they have a plan on selling it? This is bearish to me, because if the market goes higher they will exit probably near $8.40 and feel lucky, or they will need to sell it somewhere on the way down.

Soybeans are probably sucking in the "Johnny come lately" longs, and I cannot see it going higher but at least I know my producers will be more than happy if it continues higher. The all time high of $17.89 is resistance until broken, and a correction of a $1 or two is not out of the question.

As my plans for day trading also hold true for longer term, I wanted to play the short side but would be a willing buyer at significant supports. $7.40 ¼ gap is that support. Now that the options sold are worth much less than when sold, some should be bought back on breaks or continued to decay for one reason if no other, so if the market can rally for whatever reason you can sell it again.

Take a look at the options, the December corn at the money $7.80 calls settled down $.07 ½ and the $7.80 put closed up $.00 ¾ showing you again what I have always said "the winner does not win and the loser gets killed".

My bias is still bearish but would trade the numbers today without bias especially when at extreme numbers, and risk $.06 in corn and $.08 in soybeans using a stop to protect.

9/12/12:

Grains: The markets backed off to supports before the reports, and the most a bear could expect before the report. It makes sense to me and I always point out, that usually markets like to be at a comfortable price between what was recent supports and resistances and not overly committed to one side. Reason being if a bullish report is expected and we are trading near the high of the year going into the report, if the report comes in bullish it might already be priced into the market and the market experiences "buy the rumor sell the fact" if the report did not bring more buyers willing to take it higher. But if the report is bearish the market high price sure has a big way to fall to find support. Being bullish at a chart support going into a report is not like being bullish at an historic high.

Common sense and logic has a major role in all aspects of my approach, mindset, risk management, strategies and plans. Execution takes discipline and self control. Form your own that fits your personality, your time to participate, and your idea of risk and reward. Use what I do as a foundation to build or improve what you are already doing, even if it means to not do some of the things that are blocking your success, such as losing too much money on a trade idea, trading just to trade (you want action), or trading when emotional.

Having a plan at all times even if it means to do nothing is a must; otherwise you could be like a bull without a plan right now. Let's say the bull got long at $7 and then again at $8.49, he is now long 2 with an average price of $7.74 ½ looking to sell at a psychological mark of $10. That's a plan, but adding to winners like that usually looks good on paper but it does not compute in my common sense and logic part of my mind and so I abandoned that concept in my first year. Both day and overnight trade, it does not work for me. I do not like to add to my entry as the market moves my way, I like to take profits and maybe let a few contracts try and go past the number by using a 5 minute bar chart to assist in that decision.

Trouble with the above bull is he is not making any money, has twice the risk now as when he first entered at $7, and he needs to have a line in the sand to end losses from getting out of control. Never be out of control. I would have bought 2 at the initial entry and sold one somewhere in my pursuit of higher prices, and have a risk using the charts for that, and as long as I am going after more than what I am risking, I can stay in the trade. Having 1 contract after taking a profit REDUCES risk and controls emotions, the other way increases risk and at a higher price. That is how my mindset has looked at this since my first year of trading. This is what works for me and my personality, and applied in my approach.

Option winners will not win today, and the losers will get killed, especially if the market goes down. We open at 7:20am and the report is out at 7:30am, I will take calls at 7am.

Since the corn and soybean market is near pivotal supports, my bias is still bearish but would trade the numbers today without bias especially when at extreme numbers, and risk $.06 in corn and $.08 in soybeans using a stop to protect.

9/11/12:

Grains: Need to go back to 7/26/12 to find a lower close than Monday in corn. Now December corn is about $.40 away from the downtrend line resistance at $8.23, and $.40 away from the gap support at $7.40 ¼. It has a 50/50% chance of going either way, but my bias continues to be bearish due to the huge fund positions, and historic high prices being unsustainable with current guesstimates of production. November soybeans are still in bull mode above $17 but if that uptrend line goes, the bears take over.

Most of my producers have $7.90 or $8 locked in and protected down to $6 or lower. They do not have any stress or concern even if the market crashes. They would like it to rally though, because all have upside of some kind and will make more money if the market can get above $8 once again. My producers look around them and see farmers who bought call spreads to "own" their crop again, or have not sold some crop yet, worried about not only this report, but every day after too until some kind of hedge is made. My producers traded that mentality in for my strategy that allows each producer to be in control and able to execute their thoughts, while having some protection that not only reduces risk but stress too as they pursue higher prices.

Am I the only bear out here? That is what I like when at a chart resistance, the risk is small but the rewards are big if the "other side" wants to reduce their position.

About once a year I remind everyone as I inform new subscribers to things that contributed to my trading approach, and as rules such as gaps, or trend lines are constantly repeated all year long. The reason being is that as a trader you must never let it go through one ear and out the other, rules are not made to be broken but could be changed if "reason" warrants it. My rules have been with me for decades and not yet able to find reason to change. I DID NOT learn from people who were successful, they would not talk to me about trading, I learned from the losers! I was on the trade floor for 3 years before I bought my membership and not only did I observe the winners which were helpful up to a point, but it was the losers who clearly were easy to know what they did wrong that were disasters. I learned what not to do. I learned to do the opposite of them such as risk little to make a lot, they lost more than they were willing to make. I learned that talking about "why the report is wrong" as you are losing money is not the right thing to do, that's what losers do, as they had no plan if the market would go against them.

Today is the last day to adjust before the report, and my producers have not called me that last several days so they look pretty content with their positions. Only thing I can think of for producers with long $8 put spreads and short the $8.50/$9.50 call spread is to... SUBSCRIBE NOW!

I want to trade without bias today and risk $.06 in corn and $.08 on soybeans using a stop to protect any idea.

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

The markets now 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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