Volatility Creates Opportunity

Published on: 10:25AM Jan 18, 2020
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Part of the reason I love trading grain is because there are still fundamental forces at play to give you a longer-term bias. Technicals and psychology are equally as important when it comes to finding shorter term entry and exit points. Thursday and Friday’s corn trade were a perfect example of the power that techncals, market psychology, and money-flow have on the modern day market. The volatility provided a plethora of opportunity for bulls, bears, and those who are not glued to a permanent bias. We have had a bullish tilt in our bias to start 2020, but we understand there are certain times that you need to ratchet back expectations and exposure. Early in the week we suggested reducing corn based on technicals, money-flow, and psychology. We have had our resistance pocket defined as 390-392, the top end of the recent trading range. On top of the market being against significant resistance, it coincided with the signing of Phase-1, a classic buy the rumor, sell the news event. The third thing on our radar was next week’s option expiration. With a lot of open interest in the 390 calls, we thought this would keep a lid on the market. Reducing against resistance while maintaining a core bullish bias gave us the ability to add exposure back on at technical support, a pocket that we have had defined (for several weeks) as 377-381. With the market back at technical resistance into the weekend we reduce and were even looking to the short side for active clients.

Soybeans also experienced a “buy the rumor, sell the news” reaction to Phase-1. In our daily report on Tuesday morning we wrote: “The market has been treading near our support pocket for the last seven sessions, we’ve defined that as 933 ¾-937 ¼. If you’re bullish, you want to see a springboard reaction off support, the fact that we are lingering down here should be concerning. A break and close below support opens the door for a potential drop to 920-922 ¾” (Friday’s low was 920). We were working to reduce short exposure at these levels. For those of you who may be bullish, this represented an opportunity to get long exposure, but you want to be ready, willing, and able to add at the more significant support pocket from 912-916.

Chicago wheat also experienced some turbulence this week, testing and running stops above the double-top highs from June. We like leaning on the bearish side so long as these highs are defended. If the bears can continue to defend these highs, we could see a longer-term top forming.

I work on weekends, so feel free to contact me with any questions or comments!

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Email: [email protected]

Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.