Friday, September 14, 2012

Today In Commodities: Target Obtained

It is important when initiating trades to have targets. You will notice that we try to give price objectives when establishing long and short positions for our clients in most trades. After five positive sessions Crude looks like we will see a negative close with prices settling just above the 40 day MA. Taking a look at a longer term daily chart, prices are bumping up against a trend line that has capped rallies since the highs in April when Crude was near $115/barrel. Aggressive traders can scale into longs expecting a $3-4 retracement. Natural gas lost 3.5% today and is now approaching the recent lows on the cusp of making new contract lows. Once again until we see a trade above $3.85 in November, refrain from picking a bottom -- this market remains a dog with fleas.

With the 1-1.5% advance in indices today we reached our target in the S&P and got within 10 points in Dow futures (see previous posts); that is good enough for us. We are not suggesting reversing, but exit all remaining longs in the indices is my suggestion. 1-2 more basis points might be all we get lower in 30-yr bonds on this leg. If given the chance this week we would exit our clients' bearish trades.

Yes an ascending triangle is in the making in gold, which should mean in the next few sessions we get a breakout before we reach the apex. A trade above $1694; the 50% Fibonacci level should be followed by $1744 the 38.2% level. Silver picked up nearly 2%, briefly peeking its head above $33/ounce. Most clients have long exposure with a target of $35/ounce.

The dollar has closed lower six out of the last seven sessions and is approaching the 50% Fibonacci levels mentioned at 77.00 in recent posts. The Loonie is fast approaching our par target even quicker than we anticipated. Tighten stops in this trade as we may get cross currents as we think metals are supportive but we expect a trade lower in energies; trade accordingly. Aggressive traders can fade rallies in the Yen. In the coming days we will likely be establishing bearish plays in the Yen; stay tuned.

Continue to buy dips in cocoa. OJ settled back above the 50 day AM for the first time since the first week of August. November longs are fighting back from the dead. We need further help from “Mr. Market” but clients have a chance. A trade closer to $1.70 should be used to offset remaining longs. The USDA report today proved to be bearish to wheat, neutral to corn and bullish soybeans and the markets traded accordingly. Corn was slightly lower, soybeans slightly higher and wheat gave up 5%. Some clients remain lightly long corn and soybeans expecting further appreciation in the coming weeks. Clients wait on the sidelines looking for a lower long entry in 2012 live cattle contracts.

Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

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