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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.

Was That a Bear Trap in December Corn Today?

Jun 05, 2012

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY 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.   

 

Was That a Bear Trap in December Corn Today?

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

After breaking out above yesterdays high, new crop December corn broke support at yesterdays low and fell 16 cents to 507 3/4 today.  This is an outside reversal down day and we even closed below support at Fridays recent low of 508 1/4.  By traditional standards this is a sell signal, and a rather strong one at that.  It is important to note however, we saw a similar situation last Friday when we also had a sell signal coming from an outside down day but corn failed to follow through to the downside in the next session.  This was because of a hotter drier forecast on Monday.

The timing of this comes as a bit of a surprise for me as weather still seems to be a concern.  We are looking at the potential for hot temps (upwards of 90 in many areas) during the Saturday, Sunday, Monday time frame.  Many areas have not had substantial rains for over a week and the next forecast for precip is not until next Tuesday.  Now, I am not a meteorologist, but my experience with rain events after a ridging pattern is that the coverage and totals can end up being disappointing.  And my private forecasts got hotter and drier late in the day.

So, even though we did get a solid sell signal from a technical perspective, I am a little reluctant to get short after todays activity.  That being said, it would be easier if December corn were 10 cents higher because we really want to protect that $5.00 level and make sure that we get more of the new crop production hedged before we slip below it.  In the end this could be a bear trap that catches the technical traders off gaurd, but it needs to be watched closely.

When Does Weather Matter: http://www.zaner.com/offers/?page=6&ap=tseifrie

See December Corn Daily chart:

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

This means that speculators should be looking for opportunities and producers need to make sure they lock up prices that makes sense for their bottom line.  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 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?rid=Seifried

Futures, options and forex trading is speculative in nature and involves substantial risk of loss. 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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