TRADES FOR FRIDAY, JULY 19, 2019
EMOTION is your enemy more than any market will ever be.
IS THE GRAIN MOVE OVER WITH?
In my July 2 newsletter I asked that question about the corn because it was having a correction more extreme than any previous since corn bottomed in Mid-May.
I pointed out the technical damage corn had inflicted upon itself in the late June selloff. Corn then rallied to test the high and has started to selloff again. Since corn seems to have started the grain rally to begin with, is corns action suggesting the grain move is over with? Lets review:
Corns entire rally (re Sept. contract) from the 352 1/2 low to the 468 3/4 high had one minor correction in early June before advancing again even suggesting the start of a second wave up. Then the steep selloff in late June changed all that. Technically that late June correction said the entire rally that topped at 468 3/4 was actually the first wave up to a developing bull market. That correction also suggested that the market will now try to have either a 50% or 61.8% retracement, if not more, to that initial rally. That would bring Sept. corn down to 400 to 395. The long term charts support the above.
For one, corn on its monthly chart broke out of a consolidation of several years to the upside in May. Normally when there is a breakout, a market will go back and test that breakout. That is what corns correction appears to be trying to do now. And it would be testing that breakout starting at 400 to 395.
Secondly, corn has made a major trend change on that chart since its low in 2016. It has had three waves up so far and the current selloff is a correction to that third wave up. The weekly chart supports this as well.
Corns more aggressive selling can be misleading but technically all the charts suggests this is a correction to a first major rally and not the end of a move. Since the other grains have moved in sympathy with corn, is the grain move over with? Not according to corn.
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GOAL OF THE MARKET UPDATE: To give traders a technical explanation of market behavior with the goal to educate and better understand and trade the markets. What I convey to readers is not a personal opinion but what the markets are suggesting by their technical formations and action.
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Buy October hogs. Buy 78.20 stop. Protective stop 75.60. Potential projection 83.00. (Potential risk $1040. Potential reward $1920). Margin: $2420.
Reasons for the Trade:
1. On the monthly chart hogs broke out of a consolidation going back to 2016 in March. The recent major selloff was to test that breakout and the market held and confirmed that breakout with this months reversal bottom.
2. The weekly chart formed a reversal bottom last month.
3. On the weekly chart hogs have rallied over their 10 avg. suggesting a trend change attempt.
4. The daily chart has a reversal bottom.
5. The daily chart has two buy signals.
6. Today was an outside day that can trigger a signal and market direction.
Buy September copper. Buy 272.30 stop. Protective stop 269.00. Potential projection 278.00. (Potential risk $825. Potential reward $1425). Margin: $2700.
Reasons for the Trade:
1. The monthly chart formed a reversal bottom last month suggesting a trend change from down to up.
2. On the monthly chart copper has rallied back over the 100 avg. That is support.
3. On the weekly chart copper has rallied and been trading over the 10 avg. this week suggesting a trend change attempt from down to up.
4. The weekly chart suggests copper is starting a second wave up since the June low with a projection up to 278.00 for this wave.
5. On the daily chart copper rallied over both the 10 & 20 avg. last week and has held that support since.
6. The daily chart has a previous buy signal that is still intact.
SEPT CORN: Attempts to recover back over both the 10 & 20 avg. on the daily chart failed and corn sold off more today. The sell signal is still intact. On its weekly chart it has now failed the 10 avg. for the first time since the rally had started. That suggests further selling to 405 to 400. That should present a buying opportunity.
SEPT WHEAT: It finally failed 500 today and confirmed another wave down. Potential projection 475.
AUG BEANS: They keep attempting to hold 875 support. Their technical setup continues to erode suggesting that support will be taken out.
AUG MEAL: An inside day yesterday triggered a second sell signal today. It did hold support today but all the technicals continue to suggest lower prices. Keep stops at 313.60.
Position: Short 308.10 (7.16).
AUG BEAN OIL: Stops were reached today. It then recovered to close back over the 27.60 support. However, it took out the July 5 low of 27.54 suggesting further selloff. Potential projection 27.20.
Position: Long 28.10 (7.9). Exit 27.60 (7.18). Loss $355 (including costs).
OCT HOGS: Switching to October. They were stopped by the 78.00 resistance again today and formed an outside day. Both long term charts have reversal bottoms supporting hogs bottoming. A trade could be developing. See Trade Alert for details.
OCT CATTLE: The sell signal continues to follow through. They suggest they may go down to fill the 107.02 gap. Watching closely to buy.
AUG FEEDERS: They failed their 10 avg. yesterday and an attempt to get back over that support today did not work. They are most likely headed for 138.00 if not more. Watching closely to buy.
DEC COTTON: It was suggesting 62.00 but took that out today. It is now suggesting 60.00. That is long term support going back to 2005. More recently it did trade under that price to 55.00 in early 2016 but it was short lived. Just watching.
SEPT ORANGE JUICE: After fooling around with the 10 & 20 avg. on its daily chart for two weeks it finally failed both averages today and appears headed for new lows. Theres some support at 100.00. The weekly is triggering a sell this week and that suggests that support will be taken out.
SEPT COFFEE: It is attempting to rally again today. An inside day yesterday triggered a buy today and could push it higher. The test will be if it can rally over the 110.00 resistance. Its current challenge is the 100 avg. on that chart that it reached today.
SEPT COCOA: the rally today was stopped by the 24.60 market resistance. The reversal bottom is still intact. But cocoa has a lot of resistance directly above it starting with 24.60. The daily chart suggests more selling since the uptrend since the March low was violated when cocoa took out the 24.20 established in Junes correction. Watching closely to buy.
OCT SUGAR: Yesterday I said the weekly chart suggested another wave down with a projection to 11.40. So far that is where its headed. Todays low 11.53.
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. Opinions are subject to change at any time and are a solicitation or recommendation to buy or sell futures contracts or options on futures contracts. The information contained in this message has been obtained from sources believed to be reliable but is not guaranteed as to its accuracy or completeness. All known news and events have already been factored into the price of the underlying commodities discussed.
Past performance is not indicative of future results. All suggested trades are based on technical signals/indicators and do not include slippage or cost. Not all trades suggested are taken. Results are based on what the signal indicates not necessarily an actual trade. Actual results may vary.
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