The Ted Spread
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.
Soybeans Break Technical Support
Sep 20, 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.
After a corrective bounce yesterday grains were back under pressure again today with corn closing down 10 1/2 but holding support at Tuesday's lows while soybeans closed down 50 3/4 cents smashing through and closing below Tuesday's low. With the bounce yesterday it seemed that the soybeans could recover and resume the bullish uptrend of the last few months but now that we have decidedly closed below key support at Tuesday's low the chart outlook is starting to turn.
Not only did the soybeans close below key support, but it was also an outside down day where we bested yesterday's high yet closed below yesterday's low, and in this case we closed below the previous 25 days lows. This outside day is much like a key reversal however we did not set a new contract high. Tuesday's low was significant because it had held trend line support which has now been broken with today's activity. All in all we would be lying to ourselves if we said that we didn't see warning signs. As I have mentioned in conversation, there have been 3 key reversals in this move. It's also fairly obvious that the USDA is determined to keep ending stocks from falling to record lows.
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The soybean chart we see today paints a much different picture then what we saw last week. It seems that harvest pressures, better yields and a better weather outlook for South America have taken its toll. Overall the current USDA balance sheet does not justify soybeans over $18.00 in my opinion. However, it is certainly tight enough to keep prices elevated.
In the short term the soybean chart is suggesting more downside potential. It certainly would be the right time of year for it, but how cheep can soybeans get? That will really depend on how successful South America is with their crop on record planted acres. If they have a good El Nino year, which so far looks to be the case, then that could keep prices down through their harvest March - May. However, going into our next growing season the re will be a lot of pressure on a good crop and with what could be depleted sub soil moisture levels and fear of another hot and dry year we could see soybeans back to test highs again. And if South America falls short who knows how high beans can fly. My current thinking is that it is best to be about 50% sold at current prices and use a cost efficient option strategy to protect the remaining bushels to allow for upside potential for when the bins are getting dry. One of the many many jobs of a grain producer is to get the best price possible for your grain.
CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie
Or, maybe get a guy like me to help. Either way, give em hell partner.
With high volatility in a market, option strategies may be a good tool for hedgers and specs alike.
December Corn Daily chart:
November Soybeans 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 $16.00. 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.
Ted Seifried (312) 277-0113 or email@example.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