For the Week of August 27, 2012
The Trade Spotlight advisory service applies the GBE trading methodology (buying or selling commodity contracts based on breakouts of chart formations and technical indicators) to identify one to two trade setups per week.
Highlighting This Week’s Potential Breakouts:
December 2012 Coffee
The December 2012 Coffee contract sold off nine straight trading days before retracing just above 25% of the selloff based on a Fibonacci Retracement. With the market trading lower once again consider selling the contract on a breakout below the recent low of 160.25 (8/17/12). A potential downside target could be the 153.70 (6/18/12) low, a twelve month contract low. A longer term potential target could be a Wave Projection price of 146.35. Using the high of the recent selloff at 180.50 (8/06/12) and the low of the selloff at 160.25 (8/17/12) this is a “wave” of 20.25 points. If the next “wave” begins on 166.60 (the 8/20/12 high), 20.25 points lower would be 146.35. The Trend Seeker (a US Chart Company trading tool) confirms the market is in a down trend. MACD indicates maintaining a short position since late July.
October 2012 Sugar
The October 2012 Sugar contract has been selling off since late July. The market is approaching the twelve month contract low of 19.24 (6/04/12). In fact, this contract hasn’t trade that low since December 2010. The chart shows some congestion at this level back in 2010. With a surge in momentum to the downside we may see the contract trade to below the 1700 price level. This level could be the potential downside target. Recent highs can be used as a potential stop loss. The Trend Seeker confirms the market is in a down trend. The stochastic indicator is showing signs of choppy, oversold market conditions but a breakout of a twelve month low should add continued pressure to the downside.
October 2012 Feeder Cattle
The October 2012 Feeder Cattle contract was fundamentally affected by the summer drought. The market sold off by over 25 cents per pound. Trend Seeker shows the market has been in a down trend for 48 days. Recently, there may be signs the market is turning around. Both MACD and the stochastic indicator exhibit bullish factors. A breakout above the 146.050 (8/15/12) high would trigger a buy signal IF Trend Seeker flips to an uptrend in the process. Upside targets could be the 156.225 (6/29/12) high or 163.450 (6/13/12) high. Both prices were the start of recent downside waves. Consider a tight stop loss below 145.050, the low of 8/15/12, in case the momentum cannot lift the market higher on the breakout.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
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