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This report was sent to subscribers on 2/23/13 3:30 p.m. Chicago time to be used for trading on 2/25/13.
After the close recap on 2/25/13: My resistance was 6.97 3/4, .02 1/4 from the actual high, and my support was 6.83 3/4, .03 3/4 (pivot was .02 1/2 in open outcry) from the actual low.
All charts and numbers for 2/26/13 have already been sent to subscribers at 4:30 pm.
March 2013 Corn
-----------6.91 ¾ Pivot
5 day chart.... Down from last week same day
Daily chart ... Down
Weekly chart ... Sideways
Monthly chart .... Sideways 7.11 is the 200 DMA
ATR 10 ¾ Oversold 11%
For 2/25/13: I still say "January low of $6.78 and then the gap at $6.64 are supports, and the downtrend line at the bracket line at $7.08 ¾ is major resistance".
In my daily March corn numbers on Friday my resistance was .01 ½ from the actual high; my support was the EXACT actual low.
Grains: The USDA Forum expect farmers to plant 77.5 million acres of soybeans that will yield 44.5 BP. They project the carryover growing to 250 million bushel and the price declining to $10.50. USDA expects farmers to plant 96.5 million acres to corn which will yield 163.6 BPA. That results in a 2.177 billion bushel carryover and an average farm price of $4.80. Argue with the estimates if you want, and bet on what you believe will be true, but I would rather bet on the possibilities seen in the charts, rather than predicting the outcome of this year's production. I will take advantage of the market price swings, and when I can risk a little at a good support or resistance level to make a good reward if the chart level holds, that is my way of trading a market. I do not need to make every penny of every move, it is more important to stay unemotional, and control risks.
With that being said, 2013 highs are already in unless a true weather event comes into the picture, and if expectations are realized we will be at much lower price levels than where we are now.
Do you really want to know the reason why the market closed $.55 ¼ off its high? I could care less. Soybeans have become the "star of the show" lately, with corn and wheat sharing no role in it, they are just watching. It seems to me that the funds have targeted soybeans to focus their attention and money, but not like in the past by accumulating a massive position, they seem to be very short term in their objectives. That is still helpful to me as a trader this time providing a sell at a gap bracket line resistance, and for all of my producers who again this time rolled up their $14 and $14.20 puts up to $14.50 and $14.70. They did it in the last 3 trading days, capturing the $.30 of $.50 free and clear, and ending the game of deal or no deal. They do not care to gamble by saving $,20 if the market in 8 weeks will be above $14.70, or risking the $.30 profit in your hand now and do nothing and it expires below $14.20 (or $14). It is the $.30 in your hand that matters, not continuing the gamble and risk $.30 to make the last $.20. They also know that if the market never rallied, there would not be $.30 profit to capture. New subscribers should also note, my producers have been adding income to their original hedges that were rolled over since November options expired.
Now after a couple of years of watching opportunities come and go, capturing some, they seem to be more than willing to capture whatever the market gives them, and are confident what they are doing is now the right approach to take. Does not matter that the market might have rallied after rolling up their puts, and it does not matter that the market went down making it around $.07 more expensive to roll it up now, they knew it was the right thing to do and that is why they did it. My producers have all been in control of what they do, and why they do it, and understand the strategy to be confident, slow down risk, and keep emotions to a minimum. Yes, they still have questions about the "what if's" in the options they have, like what they will be worth if we are at a certain price in the future. I really am proud of them now, they all progressed at their own speed, definitely are in control of what they do, and now have learned what they need to be "self directed". They still hear the "chatter", read the news, listen to the radio, and now look at those around them as a "herd" and remember when they were one of them. They know they have an advantage they never had before, having learned what I have to offer. I am not a farmer, I do not make money on projecting what yields are (but I am allowed to guess too, when guesses are even possible), I do not have satellites, or a platoon of foot soldiers to scout 175 million acres (good luck with that), or "inside information" about SA or the PRC. I am just a trader, an option expert, and have earned the wisdom from my experiences. The value of a mentor, Priceless! If only I had one, it would have been much easier.
Nothing for producers to do now since they have rolled their puts up to the call strike sold, and they still have their original protection and now have something like the May $14.70/$13.60 put spreads. 2013 hedges have been rolled down already, but it is never too late to do so. As I have been saying, all unhedged soybeans should have some kind of an "at the money" put protection, and ... subscribe.
Soybeans posted a new high for the run and closed lower which bodes well for another down day to follow on Monday. Chances are good for the market to go down and test the gap at $14.24 ½ this week which is also about a 50% pullback from low to high. I want to take the sell signals only and risk $.06 on the idea using a buy stop to protect.
I keep saying the same story, the corn market will continue to bleed as bulls are still watching the drought areas get a little better, but they still believe in the weather services that call for trouble again this year for production. As the days go by, their story continues to erode, and to bet money on the weather but you lose money on the idea as corn goes down. It might take until June before the "weather" provides the rally the bulls are looking for, the trouble is, that rally could bring us back to where we are now. Producers continue in the "bonus round" since the December options expired, and there have been many opportunities that each producer have taken advantage of some, and now once again will make an average of $.20 if the market can get to at least $7.10 on expiration in 8 weeks from now. If it rallies whenever, you know you can... Subscribe Now!
It did not matter what soybeans have done lately, corn has looked tired and unable to show any sign of life "to the upside". I still say supports look more likely to be taken out in time, rather than the resistances. $6.78 is solid support for the March contract, and then nothing until the gap at $6.64. Bulls need to get above the strong resistances found at $7.08. Until $5.47 ½ is broken in the December contract, it remains as support to be respected. Once that goes, there is really no support until $5.37, after that it is the 2012 low on the chart made in June at $5.11. Bracket is strong resistance at $5.70 ¾. December ... subscribe now. New subscribers who are not 100% hedged 2013 corn should consider hedging here (my service is hedged 100% from $6.40 to $6.60), my gamble would be to try and hedge $.10 higher, but if it went below $5.47 ½ I would not hesitate further. It is reasonable to get the first $.80 upside "free and clear".
Corn would do well if it can stay inside the bracket lines moving sideways, and with weather permitting it will breakdown to the next support level. I prefer to take the sell signals, but would trade without bias and risk $.03 ½ on any idea using a stop to protect. I have been bearish corn and soybeans since September 2012, and I continue to have that stance for both old and new crops.
Grains: Soybeans continue to bang on the door at $15.03 ¾, but so far the gate is locked at $14.98. They need to get past there in order to be able to run to the highs of November 2012 at $15.45. I will never bet on the long side below that strong bracket line, but have no problem buying at $15.05 another day after the highs are taken out and if we see a pullback. Many times when a bracket line like this is violated, in a day or two later the market has a tendency to come back down and test what was resistance and is now support ($15.03 ¾). After Friday expiration is out of the way today, Monday can be the day where the market finally "busts through" its resistance, or gives up and implodes. I am always a willing seller at these lines, but the more days it is near the resistance, the less aggressive I become and reflected by taking less risk by selling fewer contracts. That way when it finally does break through, I have less contracts on. The first time up maybe 5 contracts let's say, then 4 the next, until finally it is only 1 every time. If I can get a pullback on 5 contracts, and then another pullback on 4 contracts, and maybe the third time I get stopped out on 3 contracts. Making more than $.06 on the winners, and only losing $.06 on the loser, I am way ahead of the "game". My approach is like that of a casino operator, I want to play the game and make sure the odds are in my favor.
Corn on the other hand continues to look "heavy" and even with the strength in soybeans, has brought little support for corn and wheat for that matter. New crop soybeans have also disconnected from old crop soybeans, failing to post gains on a strong day in the old crop. If old crop soybeans could rally above $15.03 ¾ and extend gains, that should have at least a supportive underpinning for the rest of the grains. Sure, old crop soybeans could keep going higher and the rest slide lower, but it is supportive. Put it this way, if soybeans go higher and corn and wheat go lower, they would go even lower or at a faster pace without soybeans holding a "light" shinning on the upside. Do not buy corn because you think soybeans are going higher, buy soybeans. And if you think corn is going lower than sell corn not soybeans. Trade what you watch and watch what you trade. If you buy corn because you think soybeans are going higher, you could be watching corn go down and lose money as you see soybeans indeed going higher.
The December corn $5.90/$5.50 put spread settled ...subscribe now. Use any combination to perfectly reflect what you are thinking and want, or NEED to do.
November soybeans have come back nicely tonight and are waiting to see if the March contract can drag it higher. Current hedges look adequate for now, new hedges should be entered though. If we could rally $.50 I would look to extend down coverage $.40 and sell a $.60 call spread to almost pay for it.
Lastly, soybeans just "filled the gap" and is free to move in either direction. Corn is only up $.02 showing no enthusiasm watching soybeans rally. In open outcry if soybeans are trading above the gap, I would expect corn to be no worse than firm, but it is still vulnerable to erode lower.
I continue to want to day trade the numbers without bias and risk $.03 ½ in corn and $.06 in soybeans using a stop to protect any idea.
Grains: Soybeans continued its pursuit in testing the resistance gap at $15.03 ¾. But the 3 day $.90 rally from the low, fell short once again to touch let alone get above it. This test of the bracket line "triple top" is always a "sell" the closer you get to it. Bulls should be more than happy to take profits at this objective, rather than watching it go back down giving back everything made as was the result the last 2 times tested. Time will tell if this is the time the bulls will be able to break through and go higher, but I NEVER bet on that occurrence to happen. I always look at supports and resistances will hold, until they do not. Whatever caused the soybeans to rally is irrelevant, the fact it did is all that matters, and the ability to take advantage and improve your hedge position or take speculative trades (in this case sell against the bracket line resistance) that have little risk if the line fails and good reward when it holds.
The last 7 trading days have produced closes in March corn that were within an $.08 range. It did not matter that the March soybean contract closed $.65 higher in the last 4 days alone. Trade what you watch, and watch what you trade, these markets are on its own. It is really futile to look at the fundamentals known and unknown, and form an opinion valid enough to bet on. Weather is the biggest fundamental, and that is an ever changing challenge to predict, with predictability based partly on science and partly unpredictable "what if's". Last year we started off nicely with no sign of a drought, and then it started but nobody could predict how long or severe it would be, but mostly "reported" what was already seen and what was the "forecast" in sight. Forecasts, NOT certainty. So as a trader (speculator) and same for a hedger, betting more than a "what if" bet on weather is not the prudent thing to do.
So as I admitted to you since last March, I am "off" the fundamentals, and that stance has proved to be true, especially when you look at pre report corn guesses that were 750 MB apart in the survey of analysts, so if the analysts are totally in disagreement, how can you look at any of their guesses? That is like saying you will probably die somewhere between the age of 10 years old to 98 years old. That brings us back to the charts for facts, the actual facts of what has been support and resistance in the past, which is more than helpful in price discovery of what could be support and resistance in the future. Gaps, bracket and trend lines have earned my respect from my beginning, and have always been the only "tool" that I can rely on, and allow me to risk money with a clear exit price to limit losses, and a clear objective when entering the trade idea.
My ideas of sideways ranges continues to be my view, I just do not see anything the next few weeks that could make us "breakout" from the established near term bracket lines. Both the corn charts are showing sideways action at this lower level since January, and should continue to remain between the bracket lines. December corn clearly broke down first on the daily chart, but has yet to threaten the gap at $5.47 ½. At the same time it could not rally and threaten the many resistances found in March corn at $7.08 ¾ and below. That means that there are plenty of sellers who would like to "cheerlead" it through there and have a chance to at least try and fill the gap at $7.22 ½, but that wall of resistance within $.10 is what encourage those who need to sell to at least start selling something. They remember it was just $6.78, and the bounce has been like a bowling ball.
Decades have taught me that farmer ownership is not "strong hands" because common sense and logic tells me that someone who owns grain and have no use for it except when sold, and the fact that they will be producing another crop, turns into very weak hands when downtrends continue for a few months. Last few years farmers who have waited and missed selling high prices, have not suffered from that bad behavior because the market has managed to rally the last few years for a variety of reasons, but gave them "second chances" or more to sell. You know my service has always said to manage risks, and services and producers who seek higher prices, should ALWAYS have a plan to sell to limit risks if the market goes down. These last few years farmers have made nice incomes, and they feel they now have "money to lose" and will ride out any downturns. That is the bright side, but the dark side and truth is that with a good crop this year and next, we will be in a long term downtrend that will not see these levels for years. So in essence, farmers holding grain could be like holding gold in January 1980 when gold traded $850 the "all time high", and people who held gold (no different than a farmer holding unsold grain now) thought it would go higher and possible "double' in price. What happened was they watched gold go down below $300 in the mid 1990's and trade there for quite awhile, before the recent upturn the last 10 years. They waited about 33 years before they saw that $850 again, and then "doubled" in price about 3 ½ years later. Do you want to hold your grain for 33 years?
As long as grain prices are "floating" at these already historically profitable pre planted corn and soybean prices to hedge, the farmers with deep pockets will continue to watch what the market will do, and without having some kind of hedge like ours, they will be victims of the "markets", instead of dying with a sword in our hand. I have literally seen thousands try and trade on the floor and could not last 6 months, and obviously the main reason for most of them was their lack of risk protection, and many because the "unimaginable" happened to them.
I continue to think rationing will be done in the cash market, NOT the futures market. You can see the funds appetite is not like it was before, and they are much more conservative in their participation, and they seem to not hold their positions too long. They have not shown any conviction in the fact they are not building a bigger position over time, but rather splurges of buying, and quick to sell for whatever their reasons. Bulls count on their support, I just do not see it with the positions they hold.
Those are my thoughts, you must think about what price levels YOU want to use as support and resistance, for entry and exit, and how much to risk as each opportunity presents itself. Maybe the USDA Forum will help Friday, but it is the price that puts money or takes it out of your pocket, and I always base it on the chart. The large majority of the time the chart levels we pick out are spot on as seen recently, and that is a good start, with the ones that were not adequate, would be able to be "morphed" to the next level.
I think that people with March options should exit today, especially if you want to adjust your new protection and get the upside back "at the money". If bearish, roll half and stay short the other half until Friday. Market has the potential to be volatile with the news coming out of the forum today and Friday, and the options expire on Friday.
December corn has good support $.15 below, and strong resistance $.15 above, but producers who ran out of coverage below $5.80 do not have the luxury anymore to watch and see if $5.47 ½ will hold. If I was a bull I would still need to roll half of my puts down to $5.50 for more protection. You have the same chart I do, and you know if the market is higher it will cost you less, and lower it costs more. Follow your game plan as written in your journal, or change it and write the reason why.
We were ... subscribe now. Have a plan, make sure you can live with the risk and reward YOU pick out and use. Same hedge ideas apply to soybeans, look at the strikes and settlement prices, you clearly can see what will reflect your thoughts and ideas and risk parameters with what you have learned.
I continue to want to day trade the numbers without bias and risk $.03 ½ in corn and $.06 in soybeans using a stop to protect any idea.
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